Transformational Innovation – How do you get it on a shoestring?

 Transformational Innovation – how do you get it on a shoestring?

We constantly hear economists and more recently government argue that innovation will drive the country out of recession and transform the outlook for the economy, but how does one invest in innovation when cash is hard to come by? Surely one has to relook at what we mean by innovation and what mechanisms one has to drive innovation on a budget so to speak.

When we talk about innovation, we immediately assume that it relates to technical innovation – the mainstream area where innovation has taken place over the last few decades.

Certainly technical innovation, especially if you can secure monopoly rents through patents, is a sure way of transforming the company, but getting a patent and actually securing the elusive rents is far from easy. Then there is the associated costs of securing a patent in the first place, not to mention the fact that you need to expose the innovation as part of the patent application process.

A far more controlled, and less risky approach to innovation may come from service or business innovation. By service innovation, I mean different ways of bundling services together – take the mobile phone, if they could bundle the mobile phone, with unlimited internet, with phones that can take photos and allow me to listen to music, and maybe even help me navigate the streets across London, I would really value the deal. Well as you’ve probably guessed these bundled offers are already available, but a few years back they were not. It was service innovation that brought this concept to the market, and although it now appears quite common, these were real innovations, that yielded operators real revenue and margin growth.

Tesco and other supermarkets have taken a real lead in service innovation – primarily leveraging their brands – but real innovation should go beyond just the aggregation of services, to real convergence of services – If Tesco sold me insurance, a mobile phone, online shopping etc, then they could quite easily, enable within the mobile phone offer a friends and family bundle, that allows your friends and family to receive cheaper inter-group calls – assuming this was done – a week before my Birthday, Tesco mobile could send an SMS to all the people in the friends and family group to remind them of my Birthday, and suggest gifts from the online range available from Tesco – they could also offer to send a bouquet of flowers and a card to my address, and allow each of the members to contribute to this through sending of a simple SMS reply message with the amount they wish to contribute. In sending the gift, flowers and card to my home address, a Tesco representative could also phone me to wish me a happy birthday and offer a birthday offer – either provide a discount if I were to take their car or home insurance policy – perhaps recommend a special holiday deal they have going that might be relevant for me, and so the story goes. What I have tried to illustrate in this simple example, is that innovation is possible in many ways, through the integration and convergence of services in ways that people may not have thought about before.

Innovation could also happen through disaggregation of services. Take Skype – recently acquired by Microsoft for a lot of money – this innovation was only possible because the telecoms industry was disaggregated – unbundled – that allowed Skype to innovate and bring their service to market. What is happening with the industry value chain in terms of disaggregation and how might that facilitate the opportunity to develop innovative services?

We’ll be discussing and debating some of these issues at the Business Transformation Conference.

Please do come and join the debate!    http://expo.businesstransformation.co/visitor_registration.php  Code: DR@HHL23

Dr Bharat Vagadia