Sources of innovation

Few weeks ago I attended the workshop- 'Future-proofing: Making innovation engine fire and sustain' conducted by my friend Vinay (www.catalign.com). While on the topic of sources of innovation, Vinay introduced the concept of Pain (P), Wave (W), Waste (W), {PWW}. He said PWW are the three sources of innovation. I would like to quote the examples to bring in clarity of what he meant-
1. Feel the Pain (P)- Sight of seeing a family of 4 on a 2-wheeler (common sight in India) lead to Ratan Tata (Head of Tata's) felt the pain and proposed the idea of affordable 4-wheeler in place of the 2-wheeler. This has resulted in making good quality, low cost cars called the Nano as a substitute for 2-wheelers used for riding a family of four people.
2. See the Wave (W) - Steve Job and his team getting a peak into Xerox PARC's raw version of windows Graphic User Interface (GUI) in 1979. This lead Steve to conclude at that very moment that the future user interface would be GUI. This eventually made Apple famous for its user interface and provided as a key differentiator in all its products.
3. See the Waste (W) - Toyota's lean process which basically looks at minimizing or completely removing unnecessary steps.

In the workshop I mentioned that PWW is important for innovation and also that in many ways is natural and easier to explain why innovation happens. However, I interupted to say that there are also other reasons for innovations to happen. As we could not discuss this in detail in the workshop, I felt it would be good to write this as a blog for more people to react and add. So, here is how I bring out the other reasons/source for innovations. Let us take the following examples- TV, ipod, iphone, adsense, internet, T20(one-day cricket matches with variations of rules, reducing 50 overs to 20 overs), Coffee cafe day, chocolates, high-end cars, luxury cruise, Rolex watches, designer clothes, jewellery, yoga for well-being, etc. These innovations are not driven by PWW. It seems that the drivers to come up with these kinds of innovations are- Pleasure (P), Affordability (A) and Ego (E), {PAE}. Innovating for this category/segment makes a lot of business sense. The examples I mentioned cater to a certain category, where people are looking for objects of pleasure, I don’t know why but I like it or I just want it, experience a feeling of happiness and satisfaction, etc. The kind of innovation I mentioned is of different type addressing a totally different need when compared to the PWW type of innovation.

I would try to explain the 2 ways (PWW, and PAE) of innovating using the Maslow's Heirarchy of Need (MHN) and CK Prahalad's Base of the Pyramid (BoP). The PWW applies very well apply to the lower layers of the MHN and similarly for the BoP. As you go up the pyramid in both the cases (MHN and BoP) you will quickly see that the reason for innovation becomes PAE and little to do with PWW.
It seems the idea of PWW and PAE are both important drivers for innovations. Request you comments.

Understanding the mind

Everyone talks about innovation. Its importance is understood by most and all sorts of leaders. Companies spend money on people and ideas to get to innovation. All of that is fine, but one should not try to innovate just for the sake of innovation, unless it is your hobby horse. The need to understand the user’s mind is the challenge for very successful innovations. Akio Morita (founder of Sony) initiated a market survey to check the demand for walkmans (convenient gadget for hearing music while walking). The results of the market survey showed more people not wanting the walkman and that the product would be unsuccessful. Still, Akio-san went ahead and introduced the walkman based on his gut feel (as people say it) or was it deep rooted understanding that people would want such a gadget and the negativeness simply comes from the inability to visualize such a gadget. For me Akio-san was able to read the minds of people keeping his own thoughts of the walkman as a reference to get to the point of decision that people would need a gadget like the walkman. We know the rip-roaring success walkman enjoyed in the initial years of inception.

What type of innovation is good during recession?

Spend good time in doing a proper market research before start spending in any new kind of innovation. It would be good to focus on areas where the cost of the service or product from an end user perspective is affordable to the customer segment you are going to serve. In principle one may look focus to doing disruptive innovations. For example- research as to what kind of car would India’s middle class family like to have? The result of the research was a car which is 50% lower in cost and with all the features of the most used lowest car in India. Tata Motors (Ratan Tata like Akio Morita from Sony walkman fame, is proposing the Nano car). The Nano car is a good technology example in terms of keeping the cost affordable. We need to see if this would also translate into a decent profit for Tata are an effort that supports social cause. In my opinion Tata Nano needs a business innovation now having pulled-off the technology innovation.

Simple insights, obvious solutions, and good profits

The function of business is marketing and innovation, says Peter Drucker. How true! Innovation helps companies to fight competition, improve economies of scale, generate new business, reduce costs, and create sustainable revenue streams.
Ants swarming to a sugar mould is how one can visualize the situation in Bangalore, ants=people and sugar=Bangalore. This has lead to all sorts of issues one of them been the ever increasing water problems. People used to store water in tanks made up of cement, aluminum, iron, etc. These storage units had several shortcomings. That is when I remember someone named Sintex (Company) introducing the poly-plastic water storage tank. Sintex started as an in-house unit inconspicuously of a larger parent group. Sintex saw the opportunity and the shortcomings of earlier storage. It focused on sorting out most of the issues that the earlier storage systems had kept the manufacturing process of making the tanks simple. Sintex tanks are a huge success; the unit has crossed the revenues of the parent company! Another revolutionary idea was the ATM. People could withdraw and deposit money at anytime and at many places as per their convenience. Credit card is another example. More obvious solutions to follow…

Race condition between cost and innovation during recession

In today's global market, innovation is needed to cling on as the surface become slippery (market condition). Products and services launched seem to have a shorter life period. The contributor to this has been largely due to- i. people have mastered the art and science of fast coping with added value, ii. complete replacement (disruptive innovations), iii. people’s attention span for a particular offering or product is getting smaller. This leads to market race for companies. Recession has made the market race even tougher. Currently, recession has struck hard at all sectors of economy and business. In this situation it becomes even more important on how innovation can be managed. It seem in the past (last 2 decades) people in the west have known the importance of innovating continuously, while cost saving and optimal resource utilization has been the focus in the eastern parts of the world. In today’s context with recession across the globe there seems to be some kind of consensus in the business world that innovation and cost consideration will co-exist. Cost has to be down to a point that it can still deliver meaningful innovations. During recession people become very mindful about spending, innovations have to address the immediate needs of end consumer and not focus much on the luxury add-ons.

R&D budget during recession

In general one of the first thing that is done during recession period is to cut R&d. Note the capital R and small d in R&d, this is to say that the research (R) is budget is impacted more than the development (d) budget. Most of the companies do this no matter what the industry experts say. The main reason given by the company to come up to this decision is that they don’t have any other option. Unfortunately, these decisions are taken in a hurry as most often management does not have the time to get into the detail. Cutting R&d budget may be the logical thing to do but has to be done with care keeping in mind the overall impact internally as well as the subsequent impact the company will have because of not doing enough R&d. If the revenues have decreased drastically than obviously to survive in market the expense and R&d budgets have to be cut. The sequence of R&d budget cuts could be- long term R&d investments (3 to 5 years), mid term R&d investments (2 to 3 years) and then short term R&d investments (1 to 2 years).

Has recession forced IT companies to do more innovation?

Recession has made a lot of people start thinking. Thinking is one of the first few things one does if you need to innovate. Does that mean more innovation will come? Unfortunately it doesn’t seem with a study done in some large, medium and small IT companies in Bangalore. Large would be companies with more than 10,000 employees, medium would mean between 3,000 and 10,000 and small would mean 1000 to 3000 employees.
This study was based on interviews with some of the employees in the various IT companies in Bangalore. It seems that a pattern seems to emerge from most of the conversation. 1. Times are bad, recession in the US has hit us real bad, 2. There isn’t going to be promotion and no hike in pay packet for this year, 3. Company top brass are racking their heads to figure out how to overcome the bad business situation.
It is clear that 1 and 2 are consequences of a certain input conditions. We probed into point 3 as we felt we would get some meaningful insights. What then comes out is a strong focus on cost cutting. Leave very little meat, but make sure you don’t hit the bone is the mantra. So what are the top brass racking their head on- innovate on cost cutting. Workshops are held among senior management with the agenda- 1. Get rid of the paraphernalia. 2. Why are there so many managers? 3. Get rid of experienced people, anyways the kind of work we are doing now we don’t need them. 4. Maintain Senior (people with greater than 8 years experience) to junior ratio (people with less than 3 years experience), this is one is the favorite. 5. Get rid of as many people as possible in the name of performance.
Conclusions- Did innovation happen? Not really. Even if some claims it has happened, it is purely from a cost cutting perspective. Companies are going to look like walking skeleton. I guess this is more less the case with most Indian IT companies.What we need is some positive spiraling innovations.