Innovation-Driven Strategy: A Recipe for Business Success after Recession
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1 STR IT Innovation-Driven Strategy: A Recipe for Business Success after Recession Two key components of continuous business improvement are conceptualization and innovation. While the former is related with developing ideas on which a business case is developed, the latter relates with how creativity is employed to utilize available resources to deliver a good or service. For organisations that intend to effectively compete in the global landscape, they need to devise a tactical way of improving their overall efficiency through the use of innovative processes - Israel Tommy July 2011 For organisations that intend to effectively compete in the global landscape, they need to devise a tactical way of improving their overall efficiency through the use of innovative processes. Studies have shown that the chances of survival for companies that understand their market trends and devise creative methods of improving operational efficiency through innovation are significantly higher. EasyJet, London s foremost airline, identified inefficiencies caused by lack of appropriate internet based technology and acted to take advantage of the opportunity by relocating about 90% of its operations to its online portal. This strategic move went a long way in improving its operations and despite soaring fuel costs, its profits rose by 10% to 68million pounds and passenger numbers increased by 21% to 29.6million in Through innovation, ICICI Bank of India was able to increase its transaction levels from 400,000 transactions a day in 2000 to about 2.1million in Organisations that successfully utilise innovation in their operations do not only stand the chance of improving their overall efficiency, but also achieve significant competitive advantage. These innovation-driven companies are not only able to make effective use of existing technologies; 1
2 they also make the best decisions on what technology is really required based on available market insight. In a post-recession environment where companies are looking beyond simply cutting costs to employing tactical growth strategies, innovative thinking must become the prevalent mind-set. This focus on innovation must become a corporate goal which is promoted by top management and implemented by all employees. By engaging the talents, skills and tools within and outside an organisation, it is easier to discover new methods that deliver significant value. In developing innovative ideas, the customer must be the central focus, as the success of any business enterprise is largely dependent on its ability to identify and satisfy the needs of customers. By intelligently studying the potential market and assessing the relevance of existing and emerging technologies, an innovation driven company can position itself as a market leader. To put this in perspective, highly innovative companies must; Study the market; Understand customer wants; and Use technology effectively. 2
3 Study the Market To succeed in any business enterprise, it is very important to conduct an in-depth study of the potential market or industry. This helps provide information on critical success areas such as market size, growth rate, industry players & market share and trends. The rationale for studying the market is to provide management with relevant information necessary for effective decision making. Based on insights gained from studying the market, managers can make strategic decisions related to market opportunities, target market selection, market segmentation, planning and implementing marketing programs, marketing performance and control. 3
4 Understand Customer Wants The practice of gaining insights and identifying customer s needs is called open innovation a paradigm that firms must use both external and internal ideas as well as internal and external paths to market, as they look to make significant progress in business. For example, Connect and Develop is P&G s innovation-driven strategy to connect directly with customers even before it starts selecting which product to develop. This strategy now generates more than 35% of the company s innovations and billions of dollars in revenue Organisations with a passion to drive growth and gain competitive advantage must understand the needs of their current and potential customers. By developing products and services based on the prior understanding of the needs of the end users, successful companies are well positioned to gain market share. The practice of gaining insights and identifying customer s needs is called open innovation a paradigm that firms must use both external and internal ideas as well as internal and external paths to market, as they look to make significant progress in business. For example, Connect and Develop is P&G s innovationdriven strategy to connect directly with customers even before it starts selecting which product to develop. This strategy now generates more than 35% of the company s innovations and billions of dollars in revenue. Conducting customer feedback sessions is an innovative process that delivers comprehensive assessment of the performance of a company's product and service in the market. For instance, to effectively assess the market potential of newly developed products, a selected group of customers may be allowed to use the prototypes of the new products for about a week, after which the users are interviewed and relevant information gathered is used to make necessary changes with the product before it is launched. Use Technology Effectively Rather than viewing technology as solely an enabler of business strategy, best practice organisations consider innovation as a primary input in strategy formulation. These companies also study the market with the motive of unearthing new technologies that might advance their pursuit 4
5 of fresh ideas. Through innovative thinking, Airbus, the world s leading commercial manufacturer of aircrafts, used market insight to develop a fly-by-wire technology, which is an electronically managed flight control system with enhanced safety features. With this new innovation, Airbus was able to significantly reduce fuel consumption as well as enable efficiency through cockpit design. This innovation by executives of was described as one that redefined the standard in the airline industry; a control mechanism that brings improved handling and an enhanced safety and operational commonality to its range of aircraft products. To effectively compete in today s grueling business environment, companies need to establish a seamless process that encourages innovation as this goes a long way in creating an environment that guarantees the discovery of relevant products and services which ultimately influence the profits of the company. References ICICI Bank (2009). Technology-led Transformation, India. EasyJet, London (2007). Low cost air travel. Harvard Business Review (2006). Connect and Develop - Inside Procter & Gamble's New Model for Innovation. Saul J. Berman and Jeff Hagan (2006). How technology-driven business strategy can spur innovation and growth. 4
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