Embracing New IdeasBy Faisal Hoque | Posted 2008-09-02 Print
Learn how innovation and knowledge management is leveling the playing field of the knowledge economy. Examples include: Daiichi Sankyo Group, Ranbaxy Laboratories, Boeing and its 787 Dreamliner, InnoCentive, the Linux operating system, Cementos Mexicanos, China’s Haier Group and changes in global Internet use.
Embracing New Ideas
An established company’s governance must adapt to embrace these new ideas. This requires protection for ideas, incentives for the people who advance them, organizational structures that welcome what arrives from out of the box, processes and technologies designed for this new strategy, and an agile organization that realizes it is constantly evolving. It will result in a more modular organization, and pieces of the end-to-end value chain may best reside in far-flung places, linked by technology.
Companies must embrace the concept of the extended enterprise—seeing value creation as a process that stretches beyond the four walls to include not just suppliers and customers, along with their suppliers and customers, but also idea generators, marketing partners, and negotiating partners that deal with legal and national thickets.
The developing world is a laboratory—not just for technological or scientific breakthroughs—but also for the different business models required to produce and profitably bring to market products and services. These, by necessity, are lower-cost models, and they will inevitably find their way into the industrialized world. See the examples below.
- Dr. Reddy’s Labs, the largest Indian pharmaceutical company, is developing a “poly pill” that combines into a single pill the four most common medications taken by heart patients. Managing Director Satish Reddy says his company could market this in the United States for less than $30 per patient per year.
- Tata Group, one of India’s largest companies, recently unveiled the “one lakh,”— the world’s cheapest car, selling for the equivalent of $2,500.
- Mindray Medical, a Chinese manufacturer of diagnostic and ultrasound imaging equipment, has simplified the technology of MRI machines to sell them in China. Now it’s expanding internationally, selling this equipment in Europe and the United States, and sales are rising rapidly.
What is instructive about these firms is how they mix product innovation with business model innovation. They are scrappy in their pursuit of customers.
Dr. Reddy’s started as a supplier to Indian drug manufacturers, but later began exporting to markets with little regulation. With the profits made from those markets, the company began to reverse-engineer patented drugs from more developed nations and eventually got approval from drug regulators for its formulations and manufacturing plants.
The Tata Group didn’t wait for a mass customer base to become affluent enough to buy Tata Motors’ products. Instead, it engineered the “Tata Nano,” dubbed “the People’s Car,” to improve the transportation of the masses and provide an affordable car.
In the end, such creative application of knowledge will trump established economic might and will level the playing field for everyone.
Faisal Hoque is chairman and CEO of BTM Corporation. BTM innovates business models and enhances financial performance by converging business and technology with its unique products and intellectual property. © 2008 Faisal Hoque
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