Thursday, September 10, 2009

Open Innovation

In a world where strategy life cycles are shrinking, innovation is the only way a company can renew its lease on success. It’s also the only way it can survive in a world of bare-knuckle competition.

Not every management innovation creates a competitive advantage. Some are incremental. Some are wrongheaded. And many never pay off. But’s that no excuse not to innovate.

There are different flavors of innovation and can be stacked in the increasing order of importance as follows : Operational Innovation, Product and Service Innovation, Strategic Innovation, and Management Innovation.

With rapid transformation of businesses , the nature of relationship between consumers and the firm has changed radically.

Let’s take an example here of Open & Collaborative Innovation.

Who can forget the Ford Model-T? - large assembly lines , massive production units in Detroit, you could have any car as long as the color was black ( assumption here was that the end consumer is an undifferentiated lot).

Now compare this to Apple iPOD ( my favorite! ), the iPOD as a device is manufactured with partners across the globe - disk drive from Toshiba, display modules by Matushita and Toshiba in Japan, SDRAM by Samsung of Korea , Video processors by BroadCOM of Unites states, final assemble in China by a Taiwanese firm  Inventec, and designed by Apple inc in California . The Music content is from large and small players across the globe (iTunes) and it is customized to the end users requirements.

There are other examples of customized service - iGoogle (personalized desktop) , TutorVista ( on-line tuitions)etc.The competitive arena is shifting from product-centric view of value creation to personalized user experience -centric view.

Gary Hamel in his latest book -”The future of management” clearly illustrates the message .."you cannot drive ahead by looking in the ‘rear-view’ mirror ".

Perhaps, financial services firms should take cue form this changing paradigm. Maybe we can start by asking - What is our competitive advantage ? Is it sustainable on a long term basis ? What can we do to change the paradigm of lending business (and in the process create immense value for stakeholders) ? Can we create value based on personalized experiences of consumer?
More on this in my next post…..

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