BUSINESSINSIGHTSFORACTION

IXLWhitePaperSeries Volume3;IssueNo.1 January2010

BUSINESSSECTORINNOVATION

ANALYSESBY Dr.HitendraPatel CenterforInnovation,ExcellenceandLeadership

CenterforInnovation,ExcellenceandLeadership1EducationStreet,Cambridge,MA,USA02141 info@ixlcenter.com+18572123430

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Contents
What Business Sectors are in Need of Innovative Thinkers Business Insights for Action About IXL 1 2 2

WhatBusinessSectorsareinNeedof InnovativeThinkers
As the world creeps out of the worst financial crisis in decades, company leaders must avoid falling back into bad business habits that preceded it. One of these habits is a lack of attention to innovation. Innovation, from the old way of thinking, is mainly needed in times of crisis or perhaps in an industry that is reaching maturity. But earthshaking change for companies can now happen almost overnight. Nobody has the luxury to wait for an obvious signal to start innovating. Why? Because if youve seen that signal, it probably means that somebody else has taken advantage of a new opportunity and has already left your company behind. To survive, companies themselves have to become forces of change. Innovation is the means to become thatkindofforce. Innovation is critical for all business sectors andindependentofthestageofmaturityof the industry. That is because no industry at any stage of industry evolutionis immune to change. Companies that embrace innovation are more nimble and flexible than their competition and are more able to adjust with prevailing market conditions to capture a disproportionate shareofprofit. As an example, lets look at the cell phone industry. Just recently, many observers had felt that the cell phones had matured and that the major playersNokia, Motorola and Samsung would just fight each other for a few points of market share. However, Apple's iPhone changed the game with innovations in business model and product platform. In just three years, the iPhone would garner more profits than the market leader with only 5% of the market share. Typically, innovative thinking in mature

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industriesisaroundthebusinessmodel:the valuechainandpricingmodel. Innovation can also play a big role in markets that were assumed to be very resistant to change. We have seen companies in resource and commodity industries focused on low cost and high volume, such as cement and steel, separate themselves from other companies through innovation. This has happened in Mexico with CEMEXs innovations that increase demand for consumption. In Korea, Posco has taken advantage of technology innovations for manufacturing. In addition, wehaveseenafewcompaniesinthehighly unattractive airline industry make a disproportionate amount of profit. Ryan Air and Southwest Airlines refused to play bigger competitors in relying on the traditional hubandspoke approach to managing passenger traffic. Southwests pointtopointinnovationloweredcostsand opened markets in ways that traditional companieshadnotevencontemplated. Companies in growth industries often do not fight for market share but focus on growing as quickly as possible. We are seeing this with social networks like Facebook, MySpace and Orkut. In order to grow rapidly, these companies have to maintain their innovative efforts to find new ways to access more customers while continuing to offer great customer experiences to ensure brand loyalty. You cannot rely on doing what you did yesterday to stay on the fast growth trajectory. This is what happened to Yahoo, whose complacence weakened its dominant space on the interneta weaknessexploitedbyGoogle. If somebody wanted to write a history of innovation in the new economy, we could look at tremendous developments in alternate energy solutions, medical diagnostics and the next generation digital

world called the cloud. These industries are in startup mode and the players have to be experimenting with both the product and the market to find a fit. The good news is that startups inherently attract innovativethinkers. The recent financial crisis may have misled some people about innovation. Some may feel that the last crisis was caused by too much innovation in the financial industry. I donotbelievethatwasthecase.Innovation was not the culprit: the failure was due to bad choices as well as poor management and oversight. The financial industry needs toinnovatesothatwecancontinuetohave efficient financial instruments and markets that provide liquidity to those who can growvalueandthenrepaythoseloansfora fairreturn. In an economy that is growing more global and interdependent, making sure we all embrace innovation is good for everybody. Take the financial industry, for example. If the global distaste for recent financial blunders has the effect of blunting innovationeffortsintheindustry,weallwill suffer. Following the recent recession, we all need financial markets to be safe and liquid. In other words, we need innovative methods to find how we can do both. Being too safe or too carefree wont provide solutions to make the world prosperous. We could make similar arguments concerningmanyothersectors:healthcare; water conservation, farming, transportation, etc. etc. Innovation, in the end,isaglobalpriority.

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BusinessInsightsforAction
Business Insights for Action is a collection of ideas generated through surveys, work with clients, education and workshops that provide unique insights. The objective is to demystify what it takes to make innovation realandtoaddpracticalandactionableways to help practitioners and create the foundation to drive the next generation of thought.

AboutIXL
The Center for Innovation, Excellence and Leadership (IXL Center) was founded by individuals who previously led the Innovation Practice of Arthur D. Little, IMI and the Monitor Group. The mission of IXL Center is to (1) provide training for practitioners and managers to become high performing innovation managers, (2) develop and publish deep insights on the topic of innovation breakthroughs and innovation management, and (3) build a community of innovation thought leaders and practitioners. The IXL Center has locationsinBoston,Dubai,London,Shanghai and So Paulo. The Center has strategic partnershipswithHultInternationalBusiness School, Imaginatik, InnovationTools and Arthur D Little. IXL Centers faculty includes innovation leaders from companies like Motorola, Osram Sylvania, Natura, GEN3, Palladium Group and Arthur D. Little. For more information, please contact milagros.masini@ixlcenter.com, call +1 857 212 3430 or go to http://www.ixl center.com.

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