What is innovation?

Innovation is certainly the new buzzword, the fashion of the day. It is a mantra repeated endlessly in companies, in academia, in books and even in the top echelons of governments. Boardrooms around the world echo to the ringing call to innovate, with questions as to what is being done to make the organisation an innovator. But does innovation lead to concrete benefits? Why should individuals, organisations and governments innovate? After all, innovation is, by definition, something new, an idea that has not yet been tested. Is it not risky to abandon well-proven ways for a new, unknown and unproven approach? Business thrives on certainty, and innovation inevitably means a degree of uncertainty — moving off the familiar beaten path and on to a new, untraversed road.

These are indeed valid concerns. After all, much, if not all innovation is disruptive. On the other hand, that is in fact its strength — that it disrupts existing ways of doing things and can thereby give the innovator a special advantage over established players. The good thing about most innovations is that the consumer or user also benefits — through lower price, better quality, quicker delivery or an altogether new product or service (and sometimes through a combination of two or more of these factors). This makes the product or service more competitive. For incumbents in any field — the well-established major players — the threat from new and innovative companies is a constant worry, and one that is real and immediate today. If they are to continue thriving — or even to survive — their only response to such competitive threats can be to themselves innovate. It is also a means to expand their market base by reaching new customers. Little wonder, then, that companies look at innovation as the holy grail.

Companies that do not innovate, that do not seek new customers or markets, tend to fall by the wayside in due course. Researchers (Prof. Clayton Christensen, for example) have found that doing the right thing for too long can lead to failure (think of Kodak). As Christensen says: ‘Doing the right thing is the wrong thing.’ Calling this the innovator’s dilemma, he points out that this ‘rears its head when…disruptive technology arises at the low end of the market.’

Companies now recognise  the necessity to innovate in order to grow, to compete and, increasingly, even to survive. However, such an acknowledgement of the value and need for innovation is not limited to companies: countries, too, have realised the importance of innovation. Nations also are now getting on to the innovation bandwagon. A large number of countries now have ministries of innovation and active programmes to promote innovation. Countries — as also states and cities within them — seek to encourage innovation and compete to create the facilitative ecosystem that will attract innovators and spur innovation.

India formally declared 2010-20 as the decade of innovation and set up the National Innovation Council. Based on its facilitation, many states in the country have created State Innovation Councils. Trade and industry bodies and academic institutions too have focused on innovation. Innovation funds have been started to provide early-stage capital to innovators, and there is a proposal to create Innovation Fellowships for students.

One example is India’s IT industry. Its success and phenomenal growth can be traced to an innovative business model, based on ‘outsourcing and offshoring’. In this, customers — particularly those in high-cost and talent-constrained countries like the US, the UK and Japan — outsource small or comprehensive work packages to IT companies in India. Such global supply chains, stretching across multiple countries, have long been common in manufacturing, but were rare for services. The ICT revolution provided the impetus for actually realizing the concept of ‘remote delivery’: services that could be rendered from a location far removed from the user or customer. This depends upon reliable and instantaneous transmission of data, at low cost, across continents. It was also facilitated by new technologies — both hardware and software — that made feasible such trans-shipping of work.

Paul Samuelson, Nobel laureate, is famously reported to have said, ‘You cannot export a haircut.’ One would have thought that this was equally true for secretarial services. Yet, today, it is not uncommon for executives to have their secretaries sitting thousands of kilometers away, instead of being a few feet down the corridor. After all, practically everything — except bringing you coffee! — that can be done by a secretary sitting in your office can be done by someone in a different continent. All it needs is an excellent communication network, good computer software and the usual office equipment. Such an innovation was put into practice by OfficeTiger, amongst others.