Innovation fuels the world

In the previous Industry Insight in this series, I looked at the seven major forces driving business today.

Now I will begin to unpack each of these, and the first is inventiveness, or innovation.

Innovation has been the key business differentiator for centuries. It derives from the Latin words 'in' and 'novus', or new, and refers to the ability to bring something new into life.

Without innovation, people would not be where they are today. Without the ability to invent (again from the Latin, 'in' and 'venio', which translates into 'incoming'), the world as it stands would not exist.

Thomas Edison exemplifies innovation and invention. At the time of his death, he held 1 093 patents in the US, among them the phonograph, motion picture camera, light bulb, stock ticker, car batteries, electrical power, recorded music, motion pictures and vote recorders.

There is an apocryphal tale which says the US Patent Office decreed more than 100 years ago that it was closing due to the fact that there was nothing left to be invented. Yet companies such as Xerox, IBM and Siemens continue to generate thousands of patents a year.

Apple continues to redefine genres of consumer items. Even a decade ago, no one could have dreamt that the iPod, iPhone and iPad would have turned Apple from a moribund company to the world's most powerful and valuable IT powerhouse, exceeding the value of Microsoft, Google and IBM.

Innovation often comes from left field. In fact, it almost always does.

The Sony Walkman created a category of music player that dominated the world for a decade. The iPod rendered it irrelevant. Sony simply did not see it coming.

Innovation often comes from left field.

Richard Firth is CEO and chairman of MIP.

As discussed in the previous Industry Insight, Coca-Cola completely missed a moment of inventiveness. It spent hundreds of millions of dollars analysing every designated competitor in detail and wrote a comprehensive plan on each. But the competitor that was overlooked was a new bottled liquid that would outsell Coke 3:1 before the end of 2005: water! Coca-Cola spent billions adding ingredients to water, but people were changing their behavioural patterns and wanted a basic drink. Europeans had known this for decades, of course, underscored by the success of bottled water like Evian.

This underscores how simple strategy can be.

Yet, far too often, companies spend huge amounts of time looking for complex answers to simple questions.

Amazon as an inventive organisation is a relatively simple company: a Fortune Top 5, the world's largest online bookstore and online retailer. Kindle sold seven million units in 2010 and expects to move 13 million by the end of 2011. Its model is simple but inventive: part of this is that it sells items for an average of 6% to 9% cheaper than the largest US retailers.

It used a very simple model to take over the world in terms of e-readers. It understood that many consumers would accept a “stateless” model of book delivery. They did not necessarily want to have books in a physical form, but they wanted books. The Kindle redefined the way people consume books, and each book costs next to nothing.

Apple understood the music industry was in decline, so it innovated a trust-based model in terms of which customers could download songs for 99c a pop, based on the inherent understanding that most people are trustworthy. In doing so, it reinvented the music business.

In South Africa, a number of companies have bypassed the traditional software licensing model. They have simplified what should always have been quite a simple issue, anyway, and ensured their customers can achieve the business agility, flexibility and responsiveness they have always sought.

IT was always meant to confer business benefit on companies. It was brought into being to automate and make processes predictable. Somewhere down the line, IT became the tail that wagged the dog, and companies came to accept that IT was an empire on its own.

No longer. It is time for companies to apply their innovation and inventiveness to reduce the cost of IT, to enhance competitive advantage, and to ensure alignment with business imperatives.