MT Expert - Innovation: Innovating in a downturn

If you want to make more of your existing assets, innovation is key, says Sagentia's Matthew White.

Last Updated: 31 Aug 2010

Despite the temptation to batten down the hatches and weather the storm, leading industry players across the world are reaffirming their commitment to innovation: in recent interviews, A G Lafley, CEO of Proctor & Gamble, has underlined the fact that innovation remains a fundamental part of the company's long-term business strategy. Just last month, Microsoft founder Bill Gates said that the upturn, when it comes, would be driven by innovations in science and technology. These upbeat pronouncements echo the actions taken by many organisations during the last significant economic downturn, earlier this decade; it was then, for example, that Apple famously decided to innovate, rather than retrench, by opening a string of retail outlets. Much derided at the time, Apple stores have built significant commercial and brand value.

Although Apple, Microsoft and P&G are world leading brands, their philosophy can benefit even the smallest organisation faced with a review of strategic business options. In a recession, cost-effective targeted innovation is more relevant than ever before; it can be deployed to reveal new market opportunities, make more of current assets, and can ensure R&D spend works even harder.

What we have observed is that while clients remain committed to long term innovation, budget pressures are making them more selective in their approach. Companies need to identify where best to focus innovation spend, homing in on those opportunities where innovation can deliver in the short to medium term, ideally giving a return on investment within the same financial year.

Of course, the credit crunch is changing the landscape in which we have to operate. With price now driving many purchasing decisions, suppliers have to innovate in order to create differentiated products that offer the value that justifies a sustained or higher cost. We have found that a marriage of service and product is one mechanism for delivering this value, and providing products that consumers really want and are prepared to seek out.

Service innovation can unlock market potential and reveal 'degrees of freedom' leading to important new opportunities. The award winning M-PESA mobile micro finance service is a good example. Developed by Vodafone and Sagentia, M-PESA brings together mobile phones and micro-payment services for the people of Kenya (where the system was first launched) and beyond.  It is, quite literally, changing the way people live and work in the developing world. Not only has this delivered a much-needed service for phone users, it has also resulted in improved brand loyalty for Safaricom, Vodafone’s partner network in Kenya, and a heightened regard for Vodafone and the pioneering work it has done.

Service innovation is all about building a closer relationship between supplier and customer. This increased customer engagement can provide more detailed understanding of market sectors, generating customer data of much greater quality. This leads to sharper marketing campaigns and better use of budgets.

Innovation is the key to surviving the recession – it can generate more business from existing assets or reveal new income streams with the potential to withstand the economic downturn. Innovation is not easy to start but it’s just as hard to turn off – companies already investing in innovation should regard it as a core element of their business, essential for both immediate survival and longer term prosperity.

Matthew White is Head of Innovation & Technology Management at Sagentia, an international technology management, product development and intellectual property licensing organisation headquartered in Cambridge, UK.

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