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Blogs > MWD Advisors

Innovation and wealth
Neil Ward-Dutton By: Neil Ward-Dutton, Research Director, MWD Advisors
Published: 11th June 2012
This work is licensed under a Creative Commons License
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It seems that everywhere you look, people are talking about the need for innovation. A key question would be why so much talk of the need for innovation now? Innovation has always played a key part in truly successful BPM projects, but has also been lacking in many others. Some years ago while in India I noted that the Indian hi-tech industry seemed to be content to sit back and simply rest on their mantra of “we can do it cheaper”. They did not seem to feel the need to innovate.

This caused me to research deeper into the area of innovation, and I noticed that the Indian hi-tech industry was not alone; there were many other sectors in the Indian economy where innovation was lacking too. Looking beyond India I started to look at the level and pace of innovation in Europe and the USA and noted that in traditional industries (such as manufacturing, retailing and banking) innovation appeared to be slow there too. Let me be clear, there were organisations that were making changes, lots of them, but for the most part they were incremental changes based on current products and traditional modes of operation rather than potentially game-changing innovations.

Egg (the internet bank) was one of those few exceptions and created a new bank but without branches and making use of other people’s ATM network to provide cash to their customers. Of course many would remind me that Egg subsequently made some bad choices and as result the company was sold. However, this does not take away the fact that at the time their product and market offerings were truly innovative. It does remind us though that one good idea is not enough to sustain an organisation.

It was while I was on tour in India delivering some seminars on “Next Practice” to groups like the Confederation of Indian Industry and the Loyola Institute of Business Administration business in Chennai in 2008, that friends in India then took me to meet some people in smaller more rural towns – places where truly poor people lived, particularly those involved in agricultural areas – and here I found massive amounts of innovation taking place every single day. From how to use a two-wheel scooter as a plough, to ways of using natural products to ward off mosquitoes and other unwanted pests.

It was while talking with these people that I came to realise that actually innovation never goes away, but instead is inversely proportional to wealth. When we have nothing, we innovate to find ways of getting the things we want or need, for we can’t get them any other way. Then over time we as we accumulate wealth we become comfortable, and instead of innovating we either just purchase want we think we want and need, or sit back and become contented with what we have – sadly under the illusion for the most parts that it will keep coming.

I have been a regular visitor to India for over seven years, and much has changed during that time. India is now spoken of as a hub for innovation. Navi Radjou of the Centre for India & Global Business at Cambridge University in the UK promotes Indian style innovation to the west under the banner “Jughaad”. In India the word refers to either a low cost vehicle or more generally a “creative idea that provides a quick fix or work around” and so is associated with inexpensive innovation. Personally, while I agree that “Jughaad” drives much change in India, it is not always the right path. If one considers that “Jughaad” is often also associated with poor quality, cutting corners, ignoring safety and so on, then this is not always the correct choice for those who, with means and education, might be expected to know better. However, it is a good and accurate way of looking at how most innovation takes place in rural India.

One thing that we can all agree on about the current crisis is that it seemed to come pretty quickly after the one before it! In fact the time between crises appears to be shortening and the time taken to recover is getting ever longer.  Many western businesses are still stuck in a mindset of “good enough”, but to rest on your laurels is risky, particularly when the only thing you can be certain of is more disruption. Only those who are prepared to try and innovate are likely to survive and thrive in the future.

Most people, when talking about innovation, shine a light on Apple. Well I want to use them as an example too, but not to extol their brilliance, but to remind us that a lack of innovation almost killed the company. Sometimes we forget that after the initial innovations in personal computing that created the company, management got comfortable and decided against retaining a CEO who was always looking to reinvest in innovation. So after only eight years in charge Steve Jobs was ousted in 1985. The company then seemed to bump along the bottom for a number of years, before reappointing Steve in 1996. Even after his appointment it was not until the launch of the iPod in 2001 that things started to turn around. So we can see that all was not smooth sailing for the company many admire, and hence the reason that many financial analysts are nervous to see whether Apple can continue to keep innovating in the post Steve Jobs era.

Innovation is not just the preserve of manufacturing; it has a major part to play in the services sector too. This is highlighted in a 2010 report  “Innovation and productivity growth in the EU services sector” by Uppenberg and Strauss. In their report they identified that:

“There is substantial scope for productivity improvements through innovation, both within and between certain service industries. The contrast with the manufacturing industry is that the services sector draws less on in house knowledge creation in the form of R&D, they tend to innovate more through the interactions with customers, suppliers and competitors. The fostering of knowledge transfers and spillovers is an important element in supporting services sector innovation.”

While Egg and Apple offer insight into how innovators can disrupt markets, they also offer us a reminder that innovation is not a one-off activity. Innovation is a journey, with many bumps in the road; as well as your successes you will have failures too, and it will be how you learn from those failures that will define your ultimate success.

Innovation, and ways that you can go about creating a culture of innovation in your organisation, will be one of the subjects addressed in my forthcoming report “The People Side of Change”, due out later this year. To receive an update when the report is published you can sign up for our BPM newsletter here.kpMra9hhB1U

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