Once upon a time, during the pioneer era in a faraway land called America, a young man named George invented a device that would fundamentally change the recording of life and history forever.
George Eastman, the bank clerk, went on to found Kodak, the creator of snapshot photography, one of its many innovations in the field. With its ‘You press the button – we do the rest’ slogan, Kodak brought the magic of photography to ordinary people in 1888. Yes, 130 years ago during the frontier days on which cowboy western films are based.
However, despite its continuous innovation, including inventing the digital camera in 1975, Kodak filed for bankruptcy in 2012, re-emerging a year later to focus only on its business-to-business portfolio.
That Kodak, one of the most innovative companies with a century-long history could face such a fate is no doubt one of the reasons that innovation is keeping 63 per cent of global CEOs up at night.
Innovation in the Middle East
Innovation has become such a buzzword in boardrooms across the world, including in the UAE, which launched the Year of Innovation in 2015 with the goal of making UAE one of the most innovative nations in the world by 2021. Since then, there have been annual innovation events with this year, for the first time, having the entire month of February dedicated to innovation across the nation.
Despite its ubiquitous use, however, often paired with such words as ‘disruptive’ or ‘radical’, merely defining innovation can be a challenging proposition, yet alone actually doing something innovative.
Although innovation is a concept that has many definitions, the key aspects of it include:
• An idea that solves a problem: Innovation should address a pain point, e.g. Airbnb solved the problem of finding cheaper accommodation and providing extra money for home owners;
• Something new and different: It should be something entirely original and new or an improvement on existing products/services, e.g. Airbnb combines the concept of a hotel with TripAdvisor-type reviews and the previously non-commercial hosting of friends in your home;
• Implementation: Having a brilliant idea is not enough as it has to be translated into something tangible, e.g. Airbnb platform; and
• Commercialisation or social utility: As Thomas Edison aptly stated: “Anything that won’t sell, I don’t want to invent. Its sale is proof of utility and utility is success”, demonstrating the importance of creating something that customers will pay for, e.g. both hosts and guests pay a service fee to Airbnb, or is otherwise of social value, e.g. social innovations that help reduce societal or environmental problems, but may not be financially lucrative, are nevertheless still innovative.
As almost a quarter of GCC companies surveyed cited they were more likely to talk about innovation than to do anything about it, let’s take a look at five different ways these organisations can actually do something about innovation.
Types of innovation
The Oslo Manual published by the OECD and Eurostat defines innovation in terms of its four types:
1. Product innovation: The most obvious type of innovation is inventing the product or service a company produces and is often seen as synonymous with innovation, e.g. a digital camera could be seen as disrupting the traditional film camera.
However, it is critical for a company not to be so fixated on the product itself that it fails to recognise what value and benefits it is providing for the customer. Kodak did not promote the digital camera as it feared it would cannibalise its film sales, focusing on film as a product instead of recognising the value it provides – that of capturing and preserving memories.
2. Process innovation: This is about how to improve manufacturing, supply chain, or delivery processes to increase efficiency, reduce costs and lead time. Concepts such as the lean process, Six Sigma, minimum viable product, and prototyping expedite the time to market so customers get their goods faster and increase bottom line or enable cost savings to be passed to the consumer. For example, automated machinery innovated manufacturing, RFID tags simplified delivery process and tracking goods, while drone deliveries have revolutionised the delivery of goods.
3. Marketing innovation: Innovation here is about understanding and addressing customer needs, accessing new markets, advertising and selling products in a different way, in order to increase sales. P&G sponsored radio soap operas in the 1930s to sell soap which led to its production of popular television soaps like As the World Turns.
It could be in the form of creative packaging such as Cartier’s La Panthere fragrance which is in the shape of a panther’s head, celebrity endorsements from Youtube stars, or about how goods are sold through retail distribution or direct selling, e.g. Dior was one of the first luxury brands to use social selling on China’s mobile app WeChat, by enabling its followers to directly buy its Lady Dior bag.
4. Organisational innovation: Innovation can also take place in a company’s:
a) Business practices: For example, having new business models such as Apple selling one song at a time on iTunes (as opposed to the whole album) or dubizzle where ordinary people can sell their used goods. In addition, companies can also extend their brand and diversify into areas other than in their traditional lines of businesses. Celebrities are well known for leveraging their names to sell perfumes and clothing; similarly, Virgin has ventured outside of airlines into radio, retail stores and hotels. Lego has diversified from toys to creating Lego Serious Play, an innovative business process methodology using its building blocks, to licensing its brand to the Lego Movies.
b) Internal organisational structure: How a company is organised in terms of its delegation of roles and departmental structure should be considered in terms of its impact on responding to customer needs and in promoting innovation, e.g. decentralising departments or organising teams into industry or customer segments instead of along functional lines.
c) Culture: An organisation’s culture in respect of its commitment to being open to new ideas and change is critical for innovation, increased productivity, and profits. It also includes how much support a company provides to innovative processes. Google’s 20% time enabling Googlers to work on personal projects that have resulted in Gmail and Google Maps is well-known as is 3M’s innovative culture which includes Genesis Grants awarded to company scientists for ideas as well as 3M Venture, its venture capital arm.
d) Relationships with external parties: Collaboration is one of the attributes for catalytic leadership in the digital world.
It is about expanding relationships with customers, suppliers, partners (like universities or not-for-profit organisations), and communities to create greater value through research, mutual assistance, or sharing resources and stakeholders. WordPress, the most downloaded blog and website content management system, distributes and sells third party products through its site. Therefore, while developers who contribute to WordPress themes are not paid by WordPress, they generate revenue through the sale of plug-ins or consulting for WordPress customers.
5. Customer experience: While addressed in the earlier four types of innovation, customer experience should be emphasised as a separate point given that it ought to be at the heart of every business decision and process.
Each touchpoint of the organisation’s customer journey should be mapped out, from the time the customer enters the store or website right through to the point of sale and beyond (including after-sales support and communications), to ensure that each interaction with the company is a pleasant and profitable one. Design firm Ideo uses an anthropological approach, camping out at hospitals to observe how visitors use the waiting room chairs to comprehensively understand stakeholders’ experiences to improve chair design and the entire patient journey.
A company may also provide ancillary services to address customer pain points such as banks having online services for customers’ convenience, or to improve the overall customer experience, e.g. Amazon recommending other books you may like or saving unpurchased items in a cart. Boss On Demand provides free Uber delivery, going that extra mile for Hugo Boss’ busy affluent customers.
What is key in any aspect of innovation is understanding customer’s needs, which could lead to discovering different and new customer segments. Emirates NBD, for example, is targeting the millennial customer with new digital banking products, uniquely developed for that demographic and their unique needs.
It is about gathering feedback from customers through social media and also by tracking how much they are communicating with the company, ‘liking’ or sharing posts, and even proposing ideas for new products and services such as Tesla’s customers have to Elon Musk who responds directly to such suggestions. Spotify and P&G have created communities solely for the purpose of their customers sharing ideas and feedback providing them with a wealth of valuable suggestions, engagement, and loyalty.
What will you innovate today?
Many well-known innovations are a combination of these types of innovations. Amazon and Ali Baba have revolutionised supply chain management through their digitisation, creation of new business models, leveraging their existing platforms, and collaboration with various partners in the supply chain while Apple demonstrated product, process as well as business model innovation with its iPod, each of them ensuring that customer experience was the key driver.
As product innovation is one of the most expensive forms of innovation, starting with one of the other types of innovation can be far less daunting and more cost-effective.
Even start-ups and SMEs can begin today by asking themselves what small type of innovation to improve our customer journey can we embark on today without much cost?
After all, as Steve Jobs articulated: “Innovation has nothing to do with how many R&D dollars you have. When Apple came up with the Mac, IBM was spending at least 100 times more on R&D. It’s not about money. It’s about the people you have, how you’re led, and how much you get it.”
A former lawyer and educator, Jeanette Teh is now a corporate trainer, innovation practitioner, leadership coach and founder of the self-improvement site Kaleidoscopic Sky