Contributors to this programme:
Author "The Fortune at the Bottom of the Pyramid"
Professor Jaideep Prabhu
Judge Business School, Cambridge University and
Author "Jugaad Innovation"
Professor Balram Bhargava
All India Institute
Chief Executive, Amadeus Capital
Professor Anil Gupta
Indian Institute of Management
Peter Day's Webcomment:
About this programme by Peter Day
We keep coming back to the subject of innovation on this programme because it seems to be so important.
Not just one of the ways that a 21st century company can keep ahead of its relentless competition, but maybe the only way.
All through the centuries, many people have tried to capture the essence of innovation, right back to the cry of Eureka! That announced that Archimedes had discovered the principle of density, the water he displaced getting fully immersed in his bath.
The very influential inventor Thomas Edison put it well in his famous definition of genius: one per cent inspiration and 99 per cent perspiration.
To put it another way, one per cent research and 99 per cent development.
But many people are now trying to focus the perspiration so that the Eureka! Moment, if not commonplace, becomes more accessible to people at all levels of an organisation.
Innovation is a real problem for great big established corporations. They pay much lip service to it, and set up expensive research and development departments to do it.
But successful R and D is a dangerous game, because it may well undermine the established size and shape of the company that commissions it.
The glowing example of this is Xerox, so flush with money from photocopying that it established the wondrously inventive Palo Alto Research Centre in Silicon Valley, 2,300 miles across the USA from Xerox’s HQ in Rochester, New York State.
The inventions that the brain boxes employed by Xerox at PARC came up with went on to change the world: the personal computer, the graphical user interface, and other more technical things.
But it was not Xerox that made the products or reaped much of the benefits, but interlopers such as Apple.
Another Rochester company, Kodak, had an R and D team that came up with the digital camera. Now Kodak is in bankruptcy because of the way its own invention has eclipsed 100 years of highly profitable film manufacturing.
How does a company cope with in house inventors who undermine its established business? How does a company decide to divert investment money from well-established products and departments into new and untried territory?
Can you really persuade entrenched directors delivering respected profits from their enterprises to move over and give room to the new division? Internal change like this is very hard to do.
The Minnesota Mining and Manufacturing Company 3M has long lived by a kind of house rule that every year at least one quarter of its profits come from new products. Not many businesses have the nerve to make this institutionalised policy.
Innovation is hard work. Even corporations spending much money on research and development departments will probably find that most of their efforts go into refining and extending core ideas from the company’s heartland. Another drag on genuinely disruptive, out of left field, innovation.
Various people have been thinking up ways of changing this situation, or at least approaching the problem of company innovation from different directions.
At the Sloan School of Business at MIT, Eric von Hippel, professor of technological innovation, has argued for many years that the key to innovation comes from customers, not corporate thinking.
Most companies find it difficult to take their customers seriously, even though the users of a product or service may have much deeper insights into their strengths and weaknesses than do the company that trundles them off the production line.
Clever users who modify products may have much to teach the companies that made them, even if the tinkering is strictly against the conditions of supply.
The Danish toy building brick maker Lego found that it had lots of enthusiastic intelligent users putting the blocks together in uses undreamed of at corporate HQ in rural Billund.
So they recruited these savvy customers and asked them to help devising new kinds of bricks and new ways of applying quite advanced technology to them to create robot building kits, for example.
Online collaboration such as that used to produce the Wikipedia is another potential disrupter of established methods of innovation.
The Canadian author Don Tapscott calls this Wikinomics. It is big new force for change, if it can properly be harnessed.
Some years ago, In Business heard from one of those clever offshore Indian professors, the late CK Prahalad. He was a business professor at the University of Michigan.
With Gary Hamel he devised the notion of core competence … the (often hidden) key piece of excellence or differentiation at the heart of many great big companies … maybe an excellence they are only dimly aware of, and an insight they almost certainly neglect.
But he told me then about something quite different, linked to disruptive innovation. Professor Prahalad had stumbled on the simple idea of what he called the Fortune at the Bottom of the Pyramid: the money multinational companies could make by learning how to take serious the needs and desires of the developing world’s poor three or four billion people.
Poor in buying power in western terms they may be, but they constitute a very significant consumer market place that can be very attractive to corporations if they find ingenious ways of addressing it.
Not by cheapening the content of products, he insisted, but by redesigning everything that makes a product and then gets it into the hands of its users. It may be as simple as packing up soap or shampoo in smaller sizes.
It may require a consumer goods company to set up a chain of tiny house-shops in the thousands of villages in India which have no shop at all at the moment … and building a supply chain that gets the goods to them.
Or is may require a company which is making a lot of money out of body and brain scanners in the rich world to completely redesign them for places such as India … right down to replacing the expensive purpose built printer the scanner needs in the West with a cheap and cheerful equivalent based on bus ticket printer.
This is what the American giant GE, General Electric, has done in India … it is the company started by Edison the inventor, remember.
GE’s Indian scanning adventure began after it hired a non resident Indian professor as its first corporate innovation professor. Vijay Govindarajan has taught business at the Tuck School of Business at Dartmouth College in New England for many years.
We’ve had him on this programme in the past, talking (like Eric von Hippel) about how companies need to take their customers far more seriously that they currently dare when it comes to innovation.
Now he and Chris Trimble at Dartmouth have written a new book on what they call Reverse Innovation. It is the art of using the insights and cleverness of the developing world to devise products that can build new markets in among the poor and also make an impact back at home.
Many conventional corporations will be frightened that by making radically cheaper and simpler products they will cannibalise their existing sales. It is a danger they will have to live with if they wish seriously to participate in some of the fastest-growing marketplaces in the world … the poor world.
Another Indian management expert, Professor Jaideep Prahbu at the Judge School of Business in Cambridge UK, has a similar approach to innovation in mind in his new book on a process called Jugaad.
He is an advocate of so-called “frugal” innovation, close-focussed on the real needs of real poor people rather than the corporate view of what they may need in a few years.
Jugaad is a Hindu term for cheap, ingenious invention using ingredients and lots of local knowledge, ingenuity rather than costly engineering.
At Dartmouth, Professor Govdarajan is rather sniffy about frugal. I think he finds it too amateur, too patronising to its clients.
But the revolutionary thing is not so much the cheap and cheerful bodging ingenuity of the approach but the fact that its enthusiasts are so keen on going out in the marketplace and finding out what customers might need … new fridges that do not need electricity, new splints for accident victims that get the injured to hospital for a fraction of the cost of Western devices.
Years ago this programme went on a Shod Yatra, an Indian walk of knowledge through the villages of Utter Pradesh with Professor Anil Gupta from the Indian Institute of Management in Ahmedabad.
We were looking for inventions created by clever local inventors that might be adopted by many more people if they were known about.
The tipping oxcart that spread dung with only the driver rather than a team of people with forks doing it is one example.
We encountered others, often ingenious ones - or ones based on years of experience in the field; a lemon tree that fruited all the year round, for example, or groundnuts that grew well in arid conditions (and tasted extra good, too).
Professor Gupta puts the results on the Honey Bee website so that others can share in what he and his followers find in the countryside.
Innovation, perspiration, invention is important, call it what you will. It can and probably will be disruptive, and so it ought to be if we are to solve some of the world’s pressing problems.
So perhaps it is time to disrupt the way we innovate, as well.
Insights into the business world with Peter Day - featuring content from his Radio 4 In Business…