Thursday, January 3, 2008

Innovation : Breaking the status Quo

What is Innovation?

Innovation to a finance guy would be a high risk high return game, for a marketing guy would be to be a trend setter in newer product development. Innovation by definition is a mindset , a pervasive attitude , or a way of thinking focused beyond the present into the future. Basically it is the art of welcoming risk.

Blind man’s buff!

If a blind man was taken to an elephant and asked to identify the species, he would most probably reply a large animal with two tales. Like the blind man most managers are unable to recognize innovation when it happens right in front of them.

Is innovation a process? Is it a process ? Is it a benchmark , a cross functional team , or a hip new process? Is it a management technique?

The world is getting faster !

Every passing minute brings in new techniques and processes, new organization structures, new research approaches and most common of all new jargons, all aimed at stimulating innovation in one way or the other. However these are tangible solutions while innovation is intangible.

Innovation is key to gaining competitive advantage

Porter’s five force model has been used by many to build competitive advantage but innovation is not factored into the equation.Gone are the days where cost cutting thru process streamlining, optimizing workforce, out sourcing and prudent business practices could provide a competitive advantage simply because the competition has caught up and will most probably not make the same mistakes that a company makes (AKA a faster learning curve). The incremental benefit of reducing variable costs is also limited.

Innovation can provide a path for gaining competitive advantage. Here is where the quality of the innovation comes into focus. If the new product developed are “Me-too” products (products which are improved versions of existing products) or “Trend of the moment” products (clothes for instance) then these would have low financial returns and relatively short life spans.

However out of the Box thinking can allow one to leapfrog competition and possibly stimulate an entire new demand. This new demand is far more rewarding to the bottom line then mere cost cutting. Cost cutting may sustain the company for the time being but innovation will sustain the company for perpetuity.

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