How competition changes comfort zones

AFP reports that Stephen Elop the CEO  of world-leading mobile phone company Nokia explained that Nokia is “standing on a burning platform,” surrounded by a “blazing fire” of competition.

As consumers we celebrate that competition drives firms to come up with better products. But for firms it takes a lot of effort to stay in the game.

Responsive but not pro-active innovation in business

During last year I conducted more than 100 interviews at engineering and high-tech firms in South Africa. This fieldwork was part of trying to better understand the innovation systems of which these firms formed part. On reflecting on the interview notes, I am shocked by a pattern that shows that the greater majority of these firms had a mainly responsive strategy to innovation. This means that many firms mainly did development and research work once customers asked for a specific improvement or change in a product. At least they are very responsive, but how to get from responsive to pro-active?

Although there were many firms that had a more pro-active approach to research and development, they were in the minority. Very few firms started from a scientific or technological base, combined with some or other research problem. Even firms that reported formal research and development budgets were mainly busy with incremental improvements on existing products.

From the very small sample that I have I can see that firms that had some kind of official or formal approach to research and development outperformed firms without these systems. It begs the question whether they first performed better and then engaged in product development (based on some research), or whether they first formalised research and then improved their performance. This question leads us nicely to the important point that innovation goes beyond product and process research, and that it also includes business management innovations. My research definitely supports the idea that more innovatively managed firms seems to be more creative in terms of research and development aimed at product or process innovations.

Many firms in South Africa complain that being pro-active requires fast amounts of working capital, as the economies of scale are too low to warrant huge investments. So many firms work from a successful past product. This has two implications. Firstly, that new entrants will struggle to get in at all. Secondly, that firms without a product to build on would be in deep water. But does this also pose an opportunity? Does this mean that if we can find new technological ways to overcome scale dependencies we can create new markets? Secondly, in a country with very demanding and sophisticated customers, should there not be many entry points that are not so scale dependent?

My New Years resolution is to investigate the relationship between science in business and innovation in business. Why are so few firms using a more scientific approach or basis in their business? Can science in business be stimulated? Can we use our technological and scientific base to create completely new markets, thus moving from fast and customised response to pro-active market creation?

PS. With scientific approaches in business I do not necessarily mean having labs full of white coated scientists brooding over bubling concoctions.  More about that in a next post.

How do you think we can deepen the use of science in business?

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