Innovation Yesterday, Today and Tomorrow

By Ken Westray, PE, NPDP

As we make our way through challenging economic times, we must remind ourselves that it might be the first time that we have seen the current level of severity, but others have triumphed in challenging times.  Usually they have been successful because they responded in an innovative way. How did they do it?

Ways to Innovate
I recently came across a very interesting approach to innovation developed by Chicago-based The Doblin Group.  To simplify, they view innovation in four categories:

1. finance
2. process
3. offerings
4. delivery

 
They further subdivide these categories so that there are a total of 10 innovation types. Finance and process each have two subgroups while offerings and delivery have three subgroups each. This approach provides an interesting backdrop to the innovation examples that follow.

Past Innovation
While it may seem counterintuitive to launch new products in the face of tough economic conditions, solid planning, keen awareness of customer needs, and good execution can overcome fear, uncertainty and doubt.

Writing in BNET, Melanie Warner offers several examples of successful products launched during economic downturns. In overview fashion, they include:

1. The iPod from Apple: launched in October 2001 just after terrorist attacks of September 11, 2001, the iPod was proclaimed as a “quantum leap in listening to music”. This is an example of a new offering using the Doblin framework.
2.  Sensor Razors from Gillette: the Sensor launched in January 1990 with CEO buy-in at a point where economic activity was slowing. The judgment of the shaving group’s North Atlantic unit leader was borne out as the company’s blade market doubled. This, too, is an offering innovation
3. Fortune Magazine from Time Inc.: Publisher Henry Luce introduced this premium product in 1930 just after the 1929 stock market crash.  His knowledge of his audience was such that Fortune became a leading market reference by the end of the 1930’s. Mr. Luce’s product likewise was an offering innovation.

Aside from being offering innovations, the above vignettes have common elements. They include strong leaders with excellent knowledge of their market(s) and their customers’ needs; unshakeable conviction even while others were spectators; and a discipline to follow their conviction to a successful outcome. More details of the BNET article are available online.

Current Innovation
The current struggling economy provides a daunting backdrop. Certainly, a pall hangs over the U.S. automotive industry. Amid auto companies witnessing stock collapses (especially GM), closing numerous assembly plants, laying off workers, and terminating large numbers of dealers, you would think it counterintuitive to find examples of innovation in this industry. And yet, they exist.

1. Hyundai is gaining market share.  Writer Melanie Warner chronicles the success of South Korean automaker Hyundai and its revolutionary Assurance plan. Essentially, it gives nervous new car buyers assurance that if they buy a Hyundai and either lose their job or become disabled, they can count on Hyundai to make their payments for them for three months. And, the company will not ask to have it returned. This innovation is one in the finance realm.
2. The Nano car from Tata Motors in India offers a US $2400 car that will be delivered beginning this month (July 2009). With dimensions of 10 feet in length, 5 feet in width, and a 4-gallon gas tank, it is truly small. In case you were thinking this is an aberration, you may be surprised to learn that the Nano’s parent company also owns Range Rover and Jaguar.  Clearly, the above innovation is a product offering one.
3. Investment consultant Lewis J. Walker reports that Chinese company BYD (Build Your Dreams) has introduced the world’s first mass-produced, plug-in hybrid automobile. Able to travel up to 60 miles on its lithium ion battery, the car then has its gas engine take over. Unlike the Nano, it is priced around US $22,000 in China. More importantly, U.S. company Berkshire Hathaway, led by Warren Buffet, has bought a 10% stake in BYD for US $230 million. This, too, is a product offering innovation.

Future Innovation
Following an automotive theme, there may be some innovation coming from terminated Chrysler and GM dealers. While many will go under, some will figure alternate ways to reposition themselves. One possible approach is to provide dedicated service (not original manufacture warranty) to vehicles that they formerly sold.  This route may not be effective but my sense is that car dealers, who have historically been open to doing business differently, may do so again. It will not be a path for all because it will require financial backing that many former dealers may not have.

Because we live and operate in a global economy, we can anticipate innovative approaches from almost anywhere in the world. Possibly, you and your firm will be a source for innovation in one of the Doblin areas mentioned above. I hope so.

In the meantime, keep innovating.