Long-term innovation to deliver sustainable profits, jobs
19 Dec 2012 - {{hitsCtrl.values.hits}}
By Dinesh Weerakkody
Today for many companies globally it has become an addiction to pursue short-term growth initiatives at the expense of long-term innovation that would generally generate sustainable profits and jobs.
This is because executives are rewarded on the basis of stock price and as a result forced to behave accordingly. Many of them run their balance sheets like portfolios to hedge short-term debts while failing to invest in their future, consequently, many companies have lost their ability to innovate from within. In this backdrop, it is worth noting that nations and companies which truly value and support innovation are the most successful over the long haul. For an instance, today Apple Inc. is richer than most developed nations in the world, thanks to their propriety technology. Apple Inc. has built a reputation for blue-skying the best technology to build the most valuable brand on earth. In the global economy one must find true competitive advantages based on features and capability rather than quality alone.
Delivering a solution that is ‘unique to each customer’ is becoming more important than delivering a ‘standard solution with virtually perfect quality’. The quality of innovation implies how well each business is equipped to innovate and offer high-volume custom tailor-made solutions. Therefore, businesses will have to move from ‘quality improvement’ to ‘innovation improvement’. Interestingly, innovation has now become a global issue and is being addressed by national governments and even on political platforms. For example, in the European Union, in order to grow the economy and also to improve and maintain the standard of living in the region, each country must have a national policy on innovation, create an infrastructure for innovation, and establish measures of innovation. Further, in the United States, the US Competitiveness initiatives are helping companies operating in the United States to reorient their companies to compete globally.
Productivity
Research suggests that innovation accounts for a large chunks of growth in productivity. Therefore, innovation is critical to growth. There is no such thing as a mature business; every business must find ways to grow and expand both its products, services, and reach. Innovation focuses on creating the future rather than relying on past successes. Innovation matters because it fosters growth; it excites employees by focusing on what can be; it anticipates customer requests and delights them with what they did not expect; and it builds confidence with investors by creating intangible value. Leaders who focus on innovation constantly ask, “what’s next” in all domains of their business. They recognize even-shorter half-life when 50% of current work processes are out-of-date because of new knowledge. The value or outcome of innovation must be in terms of new products, strategies, or work processes. Innovation occurs in new products and/or product extensions (e.g., features, performance, or functionality). Moreover, business strategy innovation can be depicted on the following aspects of the enterprise/firm: (1) how the enterprise makes money (e.g., services more than products), (2) where the enterprise does business (e.g., new geographies), (3) how the enterprise goes to market (e.g., new channels), (4) how the customers experience the firm (e.g., brand or how the firm services customers). Similarly, administrative innovation occurs when new processes are introduced in the following functional aspects of the enterprise/ firm finance: IT, marketing, HR, manufacturing, or other staff systems.
Education
However, to boost conditions for innovations, many companies still rely passively on universities and vocational training to create a pool of labor and then supplement those with internal training. Ironically, that approach has many flaws. Many schools of thought now consider this approach as an obsolete method of fostering innovation in firms. Contrary to the traditional way of partnering with educational institutes, if firms strategically partner with such institutions and provide curriculum guidance, mentoring, instructions, even facilities, this would create a win-win scenario for both educational institutions and firms: educational institutions could produce workers and firms could happily hire and engage them in high reward research projects that can stimulate innovation. Therefore, it is important for businesses and state institutions to advocate policies that can improve our competitiveness and there by transform our export and services industry to become world class regional brands that can deliver sustainable profits and jobs. (The writer is a senior company director)
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By Dinesh Weerakkody
