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Wednesday, January 12, 2005

Turning Big Ideas Into Innovations

We recently covered in our blog, emerging markets generating a wave of disruptive product and process innovations that are helping established companies and a new generation of entrepreneurs to achieve new price-performance levels for a range of globally traded goods and service and also some best practices that can be adopted by western multinationals.strategy+business and Knowledge@Wharton have come out with a nice framework for enabling companies to improve product innovation. Excerpts with edits and my comments added:

The most effective product development and commercialization processes encourage dynamic communication and idea sharing among engineers, marketers, and customers.
From Thomas Edison to Steve Jobs, the conventional view of product development has always portrayed the inventor as the hero. In fact, the inventor is only part of the process. The truth is, most successful product innovation requires imaginative insights and incisive action from heroes in the lab and in marketing. The most effective product development and commercialization processes have always been based on a dynamic and complex exchange of ideas and interests among engineers, marketing experts, and, most importantly, the end-consumer
. Few companies are good at managing this exchange, particularly when it comes to capturing and incorporating customer insights into product design . While it’s difficult to measure the cost of such missed opportunities, experts say that this failure to incorporate the customer’s perspective often seriously limits the potential financial and competitive value of corporate innovation.

Institutional barriers are perhaps the biggest reason. Often, engineers are tucked away so far within a company that they don’t see firsthand what customers really need .Overconcentration on technology is one of the most common sources of trouble. The biggest problems occur when you get strongly engineering-driven companies that don’t really appreciate the emotional attachment people have to products or their emotional reactions to them, and think it’s all about very specific product attributes. Genuinely valuable innovation is generated through a different dynamic: "understanding, engagement, and participation of direct customers coming together with some kind of a technology improvement."

Levers for Innovation - Discovering customer insights about products, and then incorporating those insights into product development, requires a number of initiatives at a variety of levels — personal, interdepartmental, and strategic. Although no two companies innovate in exactly the same way, successful companies often share a number of characteristics, according to Booz Allen and Wharton School Of Business experts:

1. Employees use the product before launch : eg - Harley Davidson
2. Successful innovators conduct vigorous market research of customer needs : Computerized design and improvements in supply-chain dynamics have shortened product development cycle times to levels that were unheard of just a generation ago, tempting many companies to try to take shortcuts with their market research to stay ahead of the competition. "When you have such pressures, very often companies skip the marketing research," warns Wharton marketing professor Yoram “Jerry” Wind. But that can be a huge mistake.Good examples of companies investing research : Procter & Gamble, CLAAS KGaA, Germany great sources for useful information for both modest and major product innovations.
3. The engineers stay close to the market : Contrast the successes of Bose, the sound system company, with that of Apple Computer of Cupertino, California. Both companies are technology-driven. Apple,with its exceptional focus on customer insight, has been able to invent great products with great technology, which Bose does too. Apple, however, also creates vast new markets. Witness the way it has transformed the music industry with its hugely popular iPod. Interestingly, Bose has a new sound system specifically made for use with the iPod, and it has dramatically raised its marketing and brand identity push in the last few years. At Hewlett-Packard, for instance, the company requires “everybody on the team to go together to a prospective customer and hear the customer themselves,” says Wharton’s George Day.
4. Companies perform R&D around the world: Any lanch of a major product is global these days and therefore a global research base is a must.
5. Innovative companies seek understanding of customer behavior and motivations : Starbucks has a superb record for anticipating customers unarticulated desires to create new and better experiences. "Coffee was a commodity and consumption was declining until Starbucks came up with a different concept, meeting a previously unrealized need. The company has almost single-handedly invented specialty coffees as a major category in the U.S. market, encouraged consumers to trade up to a more upscale (and therefore more expensive) product, and made the coffeehouse not just a fixture on college campuses or in urban neighborhoods, but a vital new public gathering place that’s evident throughout mainstream American life".

From modifying the structure of the development teams, to refining lines of communication within the company, to increasing the volume and thoughtfulness of the market research, tactics for improving closeness with customers are available in plenty. The key need is commitment and more innovative approaches to the process of innovation.Globalisation, Increased availability of capital, Growing trade, all bring with them increased levels of competition and innovative models for being innovative. Every enteprise needs to have a well thought out approach towards staying competitive and frameworks such as these would prove to be useful.

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