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Accenture Outlook: Why the West Needs to Learn About Workaround Innovation [Emerging Markets]

Accenture Outlook: Why the West Needs to Learn About Workaround Innovation [Emerging Markets]

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Published by Accenture
Bold new ideas are not predestined to flow into emerging markets from the developed world. A different approach to innovation pervades the new economies, born of scarcity and expressed in levels of ingenuity, resourcefulness and drive that are harder and harder to find at Western companies.
Bold new ideas are not predestined to flow into emerging markets from the developed world. A different approach to innovation pervades the new economies, born of scarcity and expressed in levels of ingenuity, resourcefulness and drive that are harder and harder to find at Western companies.

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Published by: Accenture on Jul 14, 2011
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Emerging Markets
Why the West needs to learnabout workaround innovation
By Karen Crennan and Carola Cruz
Bold new ideas are not predestined to flow into emerging marketsfrom the developed world. A different approach to innovationpervades the new economies, born of scarcity and expressed inlevels of ingenuity, resourcefulness and drive that are harder andharder to find at Western companies.
This article originally appearedin the 2011, No. 1, issue of 
The journal of high-performance business
 
2
Outlook 2011
Number 1
Over the years, the typical narra-tives about innovation have hada distinctly Western bias: Edisonand the flament bulb, Marconi andthe wireless, Berners-Lee and the World Wide Web. But perhaps it’stime or a new icon—or several o them—to illuminate the act thatinnovation today is very much aglobal phenomenon.It is relatively easy or businessleaders in Chicago or Stuttgart or Osaka to overlook the richness andrange o innovation in the developingworld—innovation not only inproducts but in business processesand behaviors as well. But VijayGovindarajan, proessor o interna-tional business at the Tuck Schoolo Business at Dartmouth College,believes that more and more inno- vation will take place in emergingeconomies because that is where thebulk o tomorrow’s customers are. And anyone who still believes thatinnovation is the exclusive provinceo developed markets has somehowmissed the rise o nanotechnologiesand biotech in Beijing, digital mediaand genomics in Seoul, biouels inBrazil and automotive technologiesin Poland.But there is another crucial aspectto this innovation story. It is not aboutwhere research and developmentunds are raised or spent, or evenabout the innovations themselves. Itis about the innovation mindset thatis pervasive throughout emergingmarkets—a mindset born o scarcityand expressed in levels o ingenuityand resourceulness that are harder and harder to fnd in the West. We call the ruits o this mindsetworkaround innovation, the entre-preneurial and usually resource-strapped approach to innovatingseen everywhere rom Mexicoto Nigeria and rom Vietnam toUkraine. It is a way o approachinginnovation that businesses all over the developed world now need torediscover in themselves—and notonly because they are pursuing marketopportunities across the globe. With the spotlight again on growth,business leaders in the developedworld are placing their aith ininnovation. Nearly 9 out o 10US and UK executives surveyedin Accenture’s latest research sayinnovation is as important, i notmore important, than cost reductionto their company’s ability to achieveuture growth. And despite theanemic recovery, there is supportor innovation unding: Almost hal (48 percent) o the executives polledreport that unding overall or innovation initiatives and activitiesincreased in the six months prior tothe survey. However, when it comesto putting innovation into practice,most are challenged to bridge theconsiderable gap between ideas andexecution (see chart, page 4).
Falling behind
More troubling, those British and American executives and their  Western peers are not keeping pacewith their counterparts in thedeveloping world in terms o thei
rates
o investing in research anddevelopment. Research publishedlast year by
R&D Magazine
andthe Battelle Memorial Instituteshowed that while R&D unding hasbeen largely at in the West, it isset to show strong gains in emergingeconomies, both now and projectedinto the uture. One snapshot: Chinaand India were orecast to drive anaggregate 7.5 percent increase inR&D in Asia in 2010, whereas R&Dspending in Europe was projectedto grow only 0.5 percent. At the same time, the Accenturestudy ound aws in the wayinnovation is managed in the West,including process shortcomingsand a lack o business discipline—both big internal barriers to suc-cessul innovation. In addition,among developed-world companies
 
3
Outlook 2011
Number 1
there is widespread aversion torisk and a ailure to learn rompast mistakes in innovating.There are bright spots, to be sure.In recent years, Western businesseshave begun to uncouple their over-all R&D eorts rom the in-houseresources available or those eorts.Companies as large as Procter &Gamble and Eli Lilly & Co. havemoved assertively toward “openinnovation” models. Those modelstranscend straightorward out-sourcing o R&D activities; theyuse systematic Web–based “seek-ersolver” idea exchanges and“crowdsourcing” techniques to tapideas rom ar beyond the company’swalls. They also actively involvediverse university aculty andellows at research institutionsaround the globe.But as many corporations continueto struggle to reignite growth, theneed or a reenergized approachto innovation couldn’t be moreurgent. This is especially importantas more organizations expandglobally, increasingly workingwith customers, employees, fnan-ciers, suppliers, inrastructure,legal rameworks and competitorswhose outlooks and experiencescan be a world away rom whattheir leaders are accustomed to.Indeed, many developed-worldcorporations, wedded to approachesand behaviors that have workedcloser to home, appear not tohave ully grasped the dierentapproaches needed to properlyaddress emerging markets.
Out of touch?
 Ask any emerging-market businessunit manager at a Western multina-tional, and there is a good chanceshe’ll tell you the global leaders inher organization have only limitedunderstanding o, let alone directexperience with, the complex ma-neuvering and multitasking requiredo operators in Latin America, Asiaor the Middle East as they seek tomeet world-class business standardswhile operating with minimalhuman and fnancial resources.That is especially true when itcomes to serving the “bottom o the pyramid” market segmentsthat tend to be highly ragmented,hard to categorize and out o rangeo conventional services, bothgeographically and fnancially. Yet such challenges are taken instride by businesses that grew upin those markets.Mexico’s Grupo Bimbo—the world’slargest bread-maker —provides acompelling example. Emphasizingthe reshness o its products andserving a vast, complex and widelydispersed system o traditionalgrocery stores and
changarros
, or small shops, Bimbo has developed ad- vanced systems or everything romsales and distribution to paymentsand inventory management. (Thecompany’s frst packages o breadwere transported by public bus toMexican grocery stores in 1947.)Bimbo invests heavily to controlits delivery chain to the pointo sale. Its capabilities in Mexicoand Latin America, born o endlessworkarounds as it turned to un-orthodox solutions to commonproblems, allowed it to rapidlydevelop an efcient distribu-tion network when it expanded toChina a ew years ago.This kind o heterodoxy can beattributed in considerable measure tothe entrepreneurship that is our-ishing in many emerging economies.Entrepreneurs are risk takers, andrisk taking is oten the enabler o in-novation. By contrast, there is at leastanecdotal evidence to suggest thatin recent years, multinationals romthe developed world are more reliant,not less, on practices and protocolspromulgated at “headquarters.”

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