Dr. Alfredo Anthony
“Sometimes when you innovate, you make mistakes. It is best to admit them quickly and get on with improving your other innovations.” Steve Jobs
I decided to upload this blog after reflecting upon one of my employment experiences as a deputy program manager for a medium-sized federal government contracting company. This moment entailed ruminations about innovation and the implications it has on businesses striving to define their competitive edge and value proposition, and it is also applicable to my current situation with NuMillennium Strategies. That is, what innovative services, products, concepts, etc. can companies offer that no other competitors adequately satisfy? The aim is to succinctly describe the situation, followed by a brief discussion of the innovation strategies the company could have pursued. I will refer to that company as Company A.
As customary, the U. S. federal government awards most contracts for five years; thereafter, the contract is recompeted by releasing a Request for Proposal (RFP). Towards the end of Company A’s contract period, the government released the RFP for the follow-on work. One of the deliverables entailed providing examples of innovative practices the competing companies would provide to the government. This requirement surprised most bidders because it was the first time the government specified an innovative approach in the RFP response. As Company A’s business development director prepared the response to the RFP, everyone was in a quandary attempting to determine what innovation entailed. I was dumbfounded because I did not understand the concept of innovation for a company that only provided professional services to the government, and was also limited in venturing beyond the scope of the contract. We devoted a significant amount of hours developing the response to the RFP. Despite our efforts, we were eliminated from the competitive round because we did not present an effective solution entailing an innovative approach for the work. The elimination also reverberated in other areas of the company because we were on the verge of losing a substantial business base. That we ignored the opportunity to expand our market during the life of the contract resulted in a chaotic pivot to business development, but it lacked focus.
In retrospect, after studying strategy and innovation, I am now convinced that I would have delivered a compelling innovative approach for Company A. Although our work only specified professional services in the Continental United States, taking a broader global perspective would have enhanced our competitive position by looking at other avenues to deliver value-added solutions to the government. Moreover, it would have paved the way to expand our growth strategy by entering the international contracting market since there were ample opportunities to diversify our business base. Consequently, Company A would have engaged in disrupting and innovating its business model to increase its market share with new clients at a reduced labor cost, as discussed by Raynor (2011).
Innovation is considered the hallmark of a company’s successful competitive advantage. It is the most significant means for a company to change its strategies through research and development, advanced technology, product and service improvement, and process improvement. Innovation has impacted every company in every market globally. Globalization has compelled organizations to aggressively differentiate themselves from competitors by developing and implementing comprehensive business strategies that reinforce policies and behaviors focused on attaining or maintaining market dominance. An effective business strategy includes the alignment of an innovation strategy that facilitates the adoption of several approaches to enhancing services and/products. There is not an innovation strategy that is appropriate for all companies; rather, companies select the strategy that produces the desired outcome (Pisano, 2015).
Mariello (2007) suggested a five-stage process to successfully implement an innovation strategy that includes: the introduction of new ideas; mobilization of the idea to different locations; selection of the ideas that have potential; testing the viability of the ideas in specific environments to define the customer and determine if the customers will use the innovation; commercialization of the innovation to determine if it answers the customers’ problem; assessment of the cost and benefits of marketing the innovation; and the diffusion and implementation in which the company provides final approval to implement the processes, resources, and structure required to produce the innovation. Without a sound innovation strategy organizations can easily produce disjointed and conflicted approaches to research and development, alliances, and customer collaborations, to name just a few (Pisano, 2015).
Innovation has been defined as applying ideas to generate value for customers. Although significant human capital, time, and money may have been invested, many companies remain unsatisfied with their innovation efforts. Innovations fail regularly, and successful innovators are confronted with focusing on maintaining their successes and are apt to invest in retaining market dominance. Companies such as Polaroid, Nokia, Sun Microsystems, Motorola, and several others succumbed to the inability to innovate their products. The principal reason those companies failed was due to the inability to develop comprehensive business strategies that incorporated their innovation efforts (Pisano, 2015).
Opening new markets is one of several categories of innovation. Market innovation is structured in two segments. The first segment emphasizes identifying and selecting a target market through careful market segmentation, which aligns with the classic Schumpeterian definition. The second segment accentuates the ability to focus on the customers’ buying habits by delivering products that are appealing to their consumption (Johne 1999). This definition suggests that markets remain stagnant and facilitate the ability for businesses to methodically segment the market to generate opportunities. Kjellberg, Azimont, and Reid (2015) argued that market innovation as defined by Johne (1999) specifies that firms satisfy the current or future demands of consumers that are already established. Past scholarly works proposed emphasizing active production of markets not only by adapting to current market conditions but by changing and developing markets. Storbacka, Nenonen (2015) posited that markets are constructed from a social basis and consequently are flexible and subjected to changes. They develop mutually as various firms introduce new or improved products, processes, or business models that affect market behaviors.
Disruptive innovation is an effective means of expanding into new markets and developing new products, which in turn can disrupt current industry landscapes (Adner, 2006). According to Christensen (2012), companies that desire to increase their business portfolio should “seek disruptive opportunities” because other industry leaders will not have the foresight to identify them. Disruptive strategies are indicative of Sony’s introduction of the Walkman audio player. The Walkman was marketed to attract non-consumers who could not afford the high-tech radios offered in the early 1980s. Most of the members of this new market were teenagers; however, Sony’s dominantion was disrupted by the Apple iPod. Apple applied a Blue Ocean strategy by changing the behaviors of the consumers by offering a product that was beautifully designed to enhance the user experience. Apple’s innovation did not offer a product at a lower price nor was it geared toward development of a new market; rather, Apple defined a behavior (Buisson & Silberzahn, 2010; Koen, Bertels, & Elsum, 2011). Furthermore, the company expanded its product lines to include the iPhone, MacBook Air, iPad, etc.
Not only did Apple define a behavior in the United States, the company was successful in exporting it to the international market, thereby, acquiring more customers. Once Apple launched the iPhone to the overseas market in 2009, they realized that 55% of their sales were being made from this market segment. Therefore, with the launch of the iPad, the leadership believed that they would also generate similar sales from the overseas market, thus, increasing its revenues (Kane and Rohwedder, 2010). Companies that are successful in developing effective innovation strategies create a competitive advantage that is sustainable for long periods.
References:
Johne, A. (1999). Successful market innovation. European Journal of Innovation Management, 2(1), 6-11. Doi: http://dx.doi.org/10.1108/14601069910248838
Kane, Y. and Rohwedder, C. (2010). Apple Strives for Global Markets, The Wall Street Journal,
Retrieved from:
http://online.wsj.com/news/articles/SB10001424052748703302604575294530119152528Kjellberg, H., Azimont, F., & Reid, E. (2015). Market innovation processes: Balancing stability and change. Industrial Marketing Management, 444-12. doi:10.1016/j.indmarman.2014.10.002
Koen, P. A., Bertels, H. M. J., & Elsum, I. R. (2011). The three faces of business model innovation: Challenges for established firms. Research Technology Management, 54(3), 52-59. Doi: http://dx.doi.org/10.5437/08953608X5403009
Pisano, G.P. (2015). You Need an Innovation Strategy. Harvard Business Review, 93(6), 44-54.
Raynor, M. (2011). Disruption Theory as a Predictor of Innovation Success/Failure, Strategy & Leadership, 39, No. 4, 27-30.
Storbacka, K., & Nenonen, S. (2015). Learning with the market: Facilitating market innovation. Industrial Marketing Management, 4473-82. doi:10.1016/j.indmarman.2014.10.009.