11 April 2010
Innovation tends to follow a fixed path–one big idea begets another, and so on. But a linear approach to innovation doesn##t always work to help companies get ahead of competitors in the digital age. How often have consumers learned the hard way that as soon as they buy the latest technology, the next big thing quickly emerges, making their purchase obsolete? Businesses often learn the same difficult lesson as they bring products and services to market, only to be trumped by companies with more sophisticated offers and deeper pockets. Companies have to continually innovate in an unending, linear cycle just to keep up.
In developing nations, where investment is scarce and markets are smaller, we don##t have the luxury of innovating at every turn. Many businesses the world over face the same challenges–there simply is not enough cash to consistently deliver the next big thing. Many Latin American executives have found their key to success lies in a leap-frog approach to the next best thing and not the traditional linear model embraced by many large multinational companies.
Take for example the telecommunications infrastructure in Latin America. As our economy has enjoyed a decade of strong economic growth, so, too, has our telecoms market, which is led by mobile and broadband telephony, as opposed to fixed line penetration. In countries like Brazil, Argentina and Mexico, consumers jumped from having no phone at all to adopting broadband and mobile technology. In other words, mobile and broadband penetration leap-frogged ahead of fixed lines in many countries.
So how can cash-strapped companies in developed nations succeed using this model from their neighbors in Latin America? They can throw away their management school text books, trust their instincts and innovate!
Create new models, but travel light. Executives in developing nations use great creativity, not to mention flexibility, to make quick decisions, and they do not fear reinventing their products and services on the fly. “Travel light” is the greatest lesson I##ve ever learned; executives in developing nations must consistently challenge themselves to not let accepted business practices prevent them from making unconventional decisions.
Take for example Alibaba, which is widely credited with capitalizing on the market opportunity in China to become the country##s leading Internet company. From the start Alibaba had the goal of becoming a platform for connecting importers and exporters around the world, not just Chinese suppliers. In order to engage experts from around the world and leverage global opportunities, Alibaba built a second management office in Hong Kong and a subsequent office in Silicon Valley. However, cultural and time zone differences made decision-making difficult and after a couple of tumultuous years, senior executives moved Alibaba headquarters back to China. This retreat in strategy proved wise, as Alibaba has since grown into a premier online marketplace enabling small businesses around the world to more easily conduct business online.
Innovate big. In developing nations, our ideas are big, even if our pockets aren##t. Fast-growing companies in developing nations don##t have time for incremental steps. Executives save time and financial resources by investing in innovation that will stand the test of time, as opposed to implementing incremental enhancements. When that big idea comes, consider what you can do to take that innovation to the next level. Finally, do a gut check–and some quality research–to make sure your innovation is built on technology and industry models that won##t be obsolete in the near term.
A prime example of a big innovation is India##s Tata Motors, which is the second-largest manufacturer of commercial vehicles in the world. The company recognized the enormous opportunity for an affordable vehicle in India##s burgeoning market and launched the Tata Nano in 2009. While the idea is big, the car is small–and the price tag smaller. The Tata Nano is designed to be the smallest automobile in the world, and sells for approximately $2,000.
In order to accomplish its design and pricing goals the Tata team had to change its entire manufacturing process and create new design techniques. The company took a hard look at all facets of the traditional automobile and challenged itself–as well as its partners and suppliers–to think different. The result? The Tata Nano recently won the 2010 Car of the Year Award by Bloomberg UTV-Autocar. Tata Motors recognized that to make an impact with its Nano automobile, it couldn##t do it halfway, and took big steps to ensure that this tiny car would be a global game-changer.