Overview
Globalization has driven competition and new challenges among firms to sustain in the marketplace. The innovation business projects in most companies follow a boom-bust cycle. As the economy prospers, companies invest substantial resources in developing innovation projects to lead in the competitive markets, while they rethink their priorities in view of the cost-benefit ratios when the markets soars. Growing firms are engaged in developing competitive strategies and innovative differentiations in staying sustainable and competitive in the global marketplace. In order to gain competitive advantages, companies explore innovative business projects to enter the new market segments with first-mover advantages. This chapter discusses the key indicators of globalization and business environment that need to be analyzed by the companies in order to develop innovative business projects to drive competitive differentiation among various consumer segments. Creating competitive advantages for innovating companies does make a difference by pulling the entire ecosystem into a creative conversation and developing a challenging business project with innovative differentiation. Leaders, who put all the pieces together, will have a huge advantage as innovation trends, lessons from business projects, and critical success factors of innovative business in the emerging markets have been critically examined in this chapter.
Globalization and Business Environment
Globalization has become a functional dynamics of the emerging firms in the business environment today. Most firms believe that globalization is a synonym to business growth, and invest perennial resources in developing strategy for going global. It has become one of the most pertinent issues for managers of growing firms around the world. In the process of evolving global, many forces drive local enterprises to globalize by expanding their brand reach and participating in foreign markets through various modes of entry. In developed countries, domestic markets have turned mature and are demanding to seek international markets, while in some countries like Brazil, Russia, India, and China, most companies in the present competitive marketplace are found to be born global. A large number of companies in the United States has been nourished by the huge domestic market, but they typically lag behind their European and Japanese rivals in internationalization. Born global firms hold dynamic growth in the competitive marketplace and achieve substantial international sales from an early stage in their development, despite economic and technological constraints. They internationalize rapidly as the period from domestic establishment to initial foreign market entry is often three years or less. Born global firms are emerging in sizable numbers worldwide. Until recently, international business was mainly the domain of large, well-resourced multinational enterprises. The appearance of large numbers of born global firms is revolutionizing the traditional character of international business and helping to reshape the global economy (Cavusgil and Knight 2009). Companies intending to go global exhibit two apparent objectives—one is to take advantage of opportunities for growth and expansion, while the other is survival in the business amidst growing competition. However, firms that fail to pursue global opportunities will eventually lose their domestic markets and may be pushed aside by stronger and more competitive global firms. In the process of going global, firms need to adopt innovative marketing strategy to sustain against competing firms. Most firms follow a global perspective to expand their business across the destinations instead of adopting a country-by-country or region-by-region perspective in developing a marketing strategy (Rajagopal 2014).
The need for competitive differentiation through continuous innovation to attract new customers and retain the existing ones has become a major challenge for the companies to sustain in the markets across geo-demographic destinations in the world today. Businesses constantly innovate to augment the stakeholder value, and deliver competitive advantages to the customer through innovation and technology breakthroughs. The customer-centric companies are engaged in developing innovative business projects not only to increase customer value in the competitive marketplace, but also to gain sustainable market share of their products and services. Innovation-driven companies are thinking afresh about capturing more value and also encouraging the start-up ventures by proving seed capital to bring innovation to business using technology and human resources. In the splurge of globalization, dynamic companies tend to spot the innovation opportunities that provide them the first-mover advantage at low cost, and leverage customer value. The innovation, thus, commonly begins with small start-up enterprises (SUEs) and is later nurtured by large companies that establish the competitive difference in the marketplace (Michel 2014).
Along with the growth of information technology, small entrepreneurial ventures are developing rapidly in the 21st century for providing business support to the large companies within the industry. A start-up company is a low-resource and small-size enterprise, or a partnership organization designed to search for an innovative and scalable business model. These companies are generally newly created, innovative in the process of development, and are engaged in customer-centric research for target markets. The start-up companies are largely located in the emerging markets and have become internationally widespread during the dot-com bubble when a great number of Internet-based companies were founded. The start-up companies are often assumed to be solely technology-based companies aiming to go global with enormous ambition, innovation, scalability, and growth.
Going global is an easy process for firms. Firms need to simulate the impact of their business in global market in reference to their resources, target markets, and operational efficiency. Most firms concentrate on product markets considering that the customers seek benefits or want to be served with the same products, services, innovation, and technology, regardless of the geo-demographic differences and cognitive behavior. There are a number of paradoxes in communicating the product-marketing strategies in global marketplace. For example, in advertising products and services in the global marketplace, paradoxical values may emerge within and between cultures. It is necessary for the firms evolving to global scale to understand that markets are people, not products. There may be global products, but there are not global people; hence, firms need to adopt the consumer-centric marketing approach in the global marketplace, rather than going rampant in employing strategies to outmaneuver or outperform the competitors in the marketplace (Svensson 2002; Rajagopal 2012).
Globalization has driven the economic philosophy of governments of many developing countries toward industrialization by allowing large multinational corporations and major financial institutions to help local companies and shape the national economy together. Various digital platforms serving to improve the business performance have widened the global reach of local business by encompassing entrepreneurs, business application developers, and small businesses, which are growing as ancillary to the large companies. Globalization, on a positive measure, has established a common thread in economic growth and instituted new-industrial revolution since the mid-20th century. The industrial revolution is driven by continuous innovation to drive competitive differentiation in business today through the movement of goods, services, finance, and people. Global flows are bonding new levels of connectedness among economies and playing an ever-larger role in determining the economic growth and companies.
Globalization and its impacts have profound implications for a broad range of issues important to the funding community. These issues range from the sustainable use of the worlds’ resources and the protection and preservation of the environment, to the need to improve living standards, safeguard human rights, promote and protect cultures, and ensure democratic and responsive global governance. Globalization of market opportunities was observed as the outgrowth of the aforementioned factors, and the scope of such marketing opportunities has increased with the continued deregulation of the significant functional sectors like financial services, leisure industry, information technology, and so on.
Most companies have adopted international expansion as a strategy by implementing the innovation projects across the geo-demographic market segments to take advantage of business opportunities. The companies prospecting to succeed in the competitive marketplace commonly set objectives as increasing revenue, bypassing hypercompetitive or saturated home market by striking innovative differentiation, and entering in an emerging or lucrative market. In the global markets, companies leverage their leadership capabilities by continuous innovation and improving their business performance against dynamic competition. However, success of business expansion in international markets is not guaranteed with conventional wisdom. The variety of factors that lead to business failures include lack of understanding of the purchasing characteristics of consumers, underestimation of the local competition, lack of innovation, supply chain issues, and poor strategic decisions, and the business analytics of expansion. However, Aldo, Carrefour, and Nordstrom were successful in the global marketplace as they understood customer preferences and focused on location advantages and customer-centric innovations (Yoder, Visich, and Rustambekov 2016).
Globalization has increased the access to the markets as the remote markets have been reduced following the political and economic changes worldwide. The market access has also been improved by the growing trade blocks at the regional level. Such accessibility to the markets is further reinforced by reducing the trade barriers through far-reaching business communication strategies, product and market development programs, and customer relations. This situation has given a boost in determining the market opportunities as narrowing the trade barriers helped in deregulating certain sectors of trade, such as financial services. The technical operating standards and protocols are being widely adapted to synchronize with the global industry standards. The resources are managed externally to a large extent as the best and low-cost materials are procured locally by the multinational companies. The benefits of global sourcing for such companies include low-cost labor, uniform quality, innovative ideas, access to local markets, economies of scale, lower taxes and duties, lower logistics costs, and more consistent supply. However, there are also some risks in global sourcing that might be political, economic, exchange, or supplier risks. In globalization, the product lifecycles are getting shorter as the new products are penetrating with higher speed in the markets due to technological development and scale of operations. In this process, many products are dropped off the product lifecycle either at the stage of introduction or growth. There are few products that sustain till the mature stage is passed. The growth of technology and its dynamic synchronization with the industry is converging fast, leading toward quick adaptations of global products. The globalization of customer requirements is resulting from the identification of world-wide customer segments of homogeneous preferences across the territorial boundaries. Business-to-consumers and business-to-business markets are powered by the consumer demands from the global companies, as they are perceived more value-oriented and of added benefits. Innovation and technology played a pivotal role in opening the global avenues for the regional firms.
As globalization marches onward, the multinational companies have shown the trend of continuous expansion to the newer geo-demographic destinations by setting alliances with the powerful local companies. The business partnering helps the multinational companies to wall against the increasingly winning competitors in the local marketplace and serving the stakeholders with the vision of “going global and acting local” with innovative and competitive differentiation. Such business expansion strategies have come true in the emerging markets, where multinational companies thrive to gain market leadership by building their brand image over the local products and services. In China and India, the instant food products, laundry detergent, and domestic appliance markets provide interesting examples of this phenomenon. The presence of multinational companies in the emerging markets has significantly affected the business of local enterprises. However, in some cases, foreign competitors have been able to resist the market gains of local competition, whether through first-mover advantages or by acquiring the leading local players and nurturing their local identity and strengths. Large companies in the local markets are able to make good returns by demonstrating the competitive differentiation by working continuously on the innovative projects and developing intangibles, such as product designs, technologies, management systems, and company cultures, partnering with local companies (Santos and Williamson 2015).
Competitive Differentiation
Companies have always bargained for competitive advantage in manufacturing and marketing of new innovative products, launching them with big infrastructure support, developing cost-effective strategies and combining it with competitive advantages, improving products and services efficiency, and managing customer-centric business operations to augment the stakeholders’ value. One of the pertinent questions that drives the companies to ponder over is not “what more to make” but “how can the things be differentiated” to offer competitive advantage to the consumers. Such situation in the market has spurred because companies have poured identical and marginally differentiated products in the market that have strayed the consumer decisions and caused involuntary cannibalization of products within the product lines of a company. Thus, companies should establish clear and sustainable differentiation in their products and services, and work on innovative business projects to gain distinctive benefits in the competitive marketplace. The gravity of designing, developing, and carrying on innovative business projects demands to rethink of the conventional strategy principles from the perspective of the sources and locus of competitive advantage and cumulative advantage over the long term against the competitors in the marketplace. However, the market dynamics in the market today is driven by shifts in customers’ purchase criteria rather than by improvements in products or technology (Dawar 2013).
Competition among firms in marketplace was regarded as a challenge toward developing and disseminating innovations among consumers in the 20th century, while it has become a way of doing business for firms in the 21st century. Firms emerge amidst competition, survive with the competing firms, and extinct or merge with stronger firms in the lifecycle. However, somewhat paradoxically, firms in a homogeneous marketplace survive with undifferentiated marketing strategies like selling identical products at the same price (Stigler 1957). International competition and the increasing globalization of business have driven global interest in the forms of governance for innovation-led production and differentiated marketing strategies. Potential firms evolve in the market competition through innovative manufacturing and marketing strategies, and developing a lean organization design. Competing firms embed their innovation insights in social networks to co-create value in business for sustainable growth.
Most consumer products manufacturing and marketing companies like Procter & Gamble (P&G) have driven its phenomenal growth over the past generation by innovating from within, successfully implementing many innovation projects and hiring the best talent across the destinations. Prior to globalization movement in the mid-20th century, most companies were smaller in their size of operation and were less competitive due to low involvement in innovative business projects. However, since 2000, a large number of companies have redefined their business growth objectives by spending greater amounts in innovation projects even for small returns as long as the innovative business project could set the percepts of competitive differentiation among consumers. Consumer products companies like P&G have replaced their conventional “invent within company” approach with an open “connect and develop” innovative business model to sustain market competition. By identifying innovation-led business projects and building on required capabilities and competencies to carry them on, P&G realized it could create better competitive differentiation and cheaper products faster by developing products faster and at relatively lower prices. Among most successful connect-and-develop products of P&G that made significant difference in the market are Olay Regenerist, Swiffer Dusters, the Crest Spin Brush, and the Mr. Clean Magic Eraser. Companies that are actively engaged in the innovation-led business models actively integrate suppliers, local manufacturers, and start-up entrepreneurs to work with new technologies, packages, and products that could create competitive differentiation in the marketplace. However, the low-resource companies are still adhering to conventional market infrastructure and are confined within the geo-demographic limits to carry out their innovation business insights (Hustin and Sakkab 2006).
A market within a competition scenario can be described at any specific point in time in terms of the direct and indirect connection among the market players (Cooke 1982). The market can, thus, be seen as a structure that is reconfigured as a result of strategic actions to outmaneuver and outperform competitors, and in this process, firms tend to switching suppliers, establishing new customer relationships, mergers and acquisitions, the formation or dissolution of strategic alliances, and forcing the entry or exit of sellers and buyers. Such strategic actions are major examples of firms reconfiguring the competitive strategy in an imperfect marketplace. The competition scenarios in the global marketplace through which firms pass in their lifecycle is as described as follows (Rajagopal 2014):
Cocooning
Open niche
Expansion-industry competition
Struggle for existence
Survival of the fittest
Consolidation
Portfolio development
Creating a posture
Achieving sustainability in business
Small firms begin their business in a niche and try to achieve perfection in business by serving the consumer segment within the geodemographic limits. Most firms initially monopolize their market with their innovative products in a niche and cocoon their marketing strategies blocking the entry of new firms in the niche. Operating on economies of scale for a large firm for commercializing the innovation-led products deliver competitive advantage significantly to the consumers at lower costs, which may further lead to the price leadership in the marketplace. In an open-market competition, there are different types and sizes of firms that use upfront marketing strategies and tactics to pull down the competing firms. Such competition forces small firms to struggle for existence against relatively large firms, while large firms strengthen their marketing strategies to sustain the competition and stay fittest in the competitive marketplace. However, large firms, at the early maturity stage of their business, attempt to consolidate their product line to stay abreast with market competition and develop product portfolio in tune to the market demand. In order to gain a suitable competitive position in the marketplace, firms pump enormous resources in innovation, technology, advertisement, communication, and sales activities. However, for some firms, returns on investment are not encouraging, and it builds sunk cost in the long run. The sunk costs are costs that have been incurred and cannot be reversed, such as spending on advertising or researching a product idea. They can be a barrier to entry. If potential entrants would have to incur similar costs, which would not be recoverable if the entry failed, they may be scared off. Another radical strategy may be used by the powerful firms to discourage entry by raising exit costs, for example, by making it an industry norm to hire workers on long-term contracts, which would build the escalated cost barriers for rival companies.
In the late maturity stage of firms in a competitive marketplace, firms engage resources in building corporate posture to sustain their business growth. A high corporate posture helps firms to stay sustainable in the competitive marketplace. Sustainable and high corporate posture builds trust among stakeholders of a firm and showcases the achievement of the organization’s objectives in the market. The survival and success of a firm is a consequence of its capacity to establish competitive advantage and corporate reputation, and to maintain a relationship with its network of stakeholders.
As a number of firms are engaged in manufacturing and marketing of identical or similar products, the competition in the market manifolds. In such a competitive market scenario, large firms attempt to outperform small firms and acquire their market share. Large firms use high active pricing strategy by making higher investment in brand promotions and keeping the high price. Firms that have higher resources develop better customer relations for boosting customer loyalty than small firms, which have inadequate resources. Large firms cannibalize the market share of small firms also through mergers and acquisition, and building strategic alliance with other companies. On the contrary, smaller firms through consortium pose challenge to the large firms by adapting multiple market disruption strategies like low prices, disruptive innovation, mass marketing, and building customer loyalty at the bottom of the pyramid segments.
Competitive intelligence also contributes to the innovation learning process of a growing firm. Competitive intelligence is the information available to the competitors for free access on the public resources, which is periodically updated to present the current contents and potential strategic information. The information acquired by the competitors through public sources serves as an important input in formulating marketing strategy. A firm must be aware of the perspectives of its competitors before deciding which competitive moves to make. In order to acquire the required information on the competitions, firms must develop an internal fit with its employees, market players, and stakeholders. Mangers of the firm should determine information needs and should take the management of the firm to prepare for driving competitive intelligence. In acquiring competency on managing competitive intelligence, managers of the firm should look into the following perspectives (Rajagopal 2014):
Developing an effective communication system within and outside the organizational system
Knowing the competitor’s organizational structure, culture, and environment
Improving internal and external market analysis capabilities of firm
Conducting an information resource gap-analysis
Mapping competitor moves based on the competitive intelligence information review
Competitive intelligence includes information beyond industry statistics and trade gossip. It involves close observation of competitors to learn what they do best and why and where they are weak. There are three types of competitive intelligence—defensive, passive, and offensive. Defensive intelligence is the information gathered, analyzed, and used to avoid being caught off-balance. In this process, a deliberate attempt is made by the competing firm to gather information on the prevailing competition in a structured fashion, and to keep track of moves of the rivals that are relevant to the firm’s business. Passive intelligence is the temporary information gathered for a specific decision. A company may, for example, seek information on a competitor’s sales compensation plan when devising its own compensation plan. Offensive intelligence is the information gathered by the firms to identify new opportunities and from a strategic perspective. Such intelligence is most relevant for a growing firm amidst competition (Rajagopal 2012). Competitive intelligence is most commonly used by the following departments of a business firm:
Innovation planning and research
Research and development
Business development
Product planning
Strategic planning
Financial planning
A good competitive intelligence allows decision makers to prepare for changes in the market and act on the situation instead of reacting. Most firms engage external agencies to collect marketing information and competitor moves within the industry. Market research agencies collect information in a legal and ethical manner through valid primary, secondary, internal, and external sources. The competitive intelligence research agencies identify the patterns and anomalies in the acquired market information, and refine the data to support firms in developing appropriate competitive strategies and marketing decisions.
Firms operating in the global marketplace should know that there are two business scenarios that affect the management competitive intelligence. Firstly, environmental forces, which are external factors, such as events that can cause a company to achieve or fail to achieve its business objectives, and secondly, the competitive forces, which describe competitors’ activities and plans (Pehrsson 2011).
Firms also maneuver the arena of customers, channels, institutions, and the geographical coverage in order to reconfigure their competitive strategy. The factor advantage in the competition may be defined as the relationship of the manufacturing or marketing company with the service providers who develop loyalty toward them. The service providers may be the suppliers of raw materials, packaging services, hiring of machines, and the like. Many companies use the legal support, government patronage, and so on to shape the competitive conditions to their advantage while building the institutional arena in the business. The software companies like Intel, Microsoft, and 3M always keep extending the product line, implementing the research and development results, and never let the competition stagnate in the end-customer arena. The healthy companies feel that greater the competition, higher will be the challenge to establish the brand in the market (Fahey 1999).
The conceptual framework of competitive forces in the marketplace has been provided by Porter as a five-force model for industry analysis comprising the interactivity of new entrants in the marketplace, availability of substitutes, bargaining power of suppliers and consumers as the key role players in marketing of products and services, and rivalry among the firms. These five forces of competition interact to determine the attractiveness of an industry. The economic value of a firm and brands thereof may be drained away among the existing competitors if the rivalry of firms within the industry is acute. However, it can also be bargained away through the power of suppliers or the power of customers, or be constrained by the threat of new entrants or the threat of substitutes. Competitive strategy can be viewed as building defenses against the competitive forces or as finding a position in an industry where the forces are weaker. The changes in the strength of the forces signal a change in the competitive landscape, which is often critical to ongoing strategy formulation (Porter 2008).
Innovation Trends
Consumers today are sensitive to the innovation and technology that offer sustainable competitive differentiation and deliver competitive stakeholder value. Most companies follow a boom-bust cycle in managing their innovation for improving business performance in the competitive marketplace. As companies rethink their priorities analyzing the market demand, they try to deliver innovation-led products and bring competitive differentiation against the existing and potential threats. Sustainable innovation requires a new approach to manage innovation initiatives, and companies need to build capabilities on improving the innovation processes. A network of innovation intermediaries including independent innovators and start-up companies would be visualizing new opportunities from the market insights and technologies to provide solutions to several companies. Such ideas might never occur to companies while working on their own (Wolpert 2002).
Innovation has emerged as a true engine of business growth for the companies after human capital. Innovative differentiation in the marketplace is brought in the markets by “start-up or seed companies” across the world, as it is evidenced by the big emerging markets like China and India in reference to the local growth and business dynamics. In order to maximize the business performance, companies should ensure that the key enablers of entrepreneurship and innovation, including managerial skills, capital, infrastructure, and research and development are applied to drive innovation. The innovation-driven companies should also overcome the challenges associated with asymmetric product demand and the changing consumer preferences. In short, innovation in a company needs to underpin any change faster than the competitors. Boosting innovation-led business performance largely depends on how quickly the company can move to competitive production that focuses on innovation and technology-driven products. Most companies are continuously engaged in bringing consumer innovations to the market, diffusing new insights among the market players to create quick impacts of competitive differentiations among the consumers. Gaining access to and deploying these innovations easily and cost-effectively in the market drives the success of companies today. The new technology trends in 21st century affect the innovation process of consumer-centric and business-to-business-oriented companies.
The Internet of Things (IoT), which has been termed by Cisco, refers to the “The Internet of Everything” and predicts that 50 billion devices (including our smartphones, appliances, and office equipment) will be wirelessly connected via a network of sensors to the Internet by 2020. Cisco also estimates that IoT will be valued at $4.6 trillion for the public sector in the next 10 years. These trends indicate that most companies that are engaged in innovation of consumer electronics, communication, geographic positioning devises, and information management systems would be relying on Internet-based technology as an integrated element. The key components of IoT include Big Data (and data mining), sensors (radio frequency identification, chips, semiconductors, and transistors), and business analytics giving predictive awareness to the companies about carrying out the innovative business projects. Companies engaged in IoT services innovations are focusing on facilities and infrastructure management, industrial applications, energy (smart grid), medical and health care, transportation, building or construction (smart buildings), environment (waste management), water resources, retail and supply chain, communications, and education (learning analytics). These companies use new technology trends toward automation, robotics, enabling nanotechnologies, self-assembling materials, artificial intelligence (AI) (human and computer interface), 3D printing photovoltaics and printed electronics), wearables (flexible electronics), real-time analytics and predictive analytics, supercomputing (faster and more connectivity), increased storage and data memory power, wireless networks, secure cloud computing, and virtualization. The trend of innovation today is focused largely on consumers and developing new markets for the industrial products as well. The attributes of innovation are exhibited in Figure 1.1.
The customer-centric innovations are growing rapidly in the global marketplace by assessing the needs and preferences of consumers and exploring the latent demand to determine the market potential, as illustrated in Figure 1.1. The consumer-centric innovation is carried out by the companies to deliver convenience, high perceived value in reference to application, satisfaction, and monetary gains in reference to the competitive differentiation. Consumer-led innovations are driven by the 4A-factors, comprising awareness, availability, affordability, and adaptability, reviewing the innovation lifecycle, sustainability, and scope to upgrade the technology embedded in the innovations. Industry-focused innovations are largely directed toward building new markets, acquiring new clients, achieving market leadership, and reinforcing corporate image in business-to-business market environment. Most of the innovative business projects are developed around the objectives of enhancing productivity with zero defects through lean manufacturing operations. Hence, most companies are employing automation using robotics-led innovation and improved controls and measures. Industrial innovations have random growth in the marketplace driven by the emerging “startups” across the countries that offer new insights to the companies for their business growth. The upcoming “startups” extensively work with the information technology and offer digitization-led innovative solutions that offer competitive advantage and unique business proposition to the companies. However, for small startups, economic viability of the innovation appears to be an up-hill challenge.
Figure 1.1 Trends and attributes of innovations
Innovation and competitive insights among the companies are rapidly infiltrating since the early 21st century as the use of Big Data and business analytics has narrowed the information gap. The growing applications and advantages of information technology have been very supporting to the innovation of products and services, which helped the companies and public governance departments with the required tools to uncover trends, population movements, customer preferences, demographics, commerce traffic, transportation, and so on. These tools can also help several industries, including the customer service by identifying caller trends, health care by flagging potential fraud, and financial services by proactively flagging a borrower that is on the verge of lapsing in payment. The companies are innovating today within the digital transformation ambiance by digitizing the customer experience, managing data flow, cost-effective supply chain management, e-governance, and operating through virtual design centers.
Emergent AI and augmented reality technologies are rapidly being applied in the services and management operations in both the public and private sectors since the beginning of 21st century. Companies are already developing technology to distribute AI software to millions of graphics and computer processors to manage machine learning, and natural language processing that helps to solve a variety of business problems. Robotics is also becoming more ingrained in the deployment of AI. Recent breakthroughs in physics, nanotechnologies, and materials science have brought computing reality, which has set new trends in the innovation of products and services.
One of the recent trends in business has been extravagantly driven by the innovating consumer electronics with remote operating devises among the companies across the destinations in the world. The new innovations are built around the amateur brands in the market manufactured by the start-up companies or niche companies and marketed by online outlets including Amazon.com and many regional virtual outlets. The performance of such new innovations is widely discussed on social media and consumer networks anchored by the popular blogs and online discussion forums. Sharing of verbal (text) and nonverbal (video) consumer generated contents has emerged as the most powerful business performance tool. Attentive start-up entrepreneurs have introduced the Instagram application by motivating instant art-photographers who could brainstorm on social media by asking perception and experience of consumers about new of brands products and services of the companies.
Most of the innovations triggered by the SUEs are woven around consumer needs and their preferences toward convenience, sustainable technology, and value for money bargain. Such product innovations include technology-driven products for the mass consumers. Robotic technology with easy-to-use baby products, such as a baby seat that bounces and sways like human parents, has emerged as a crash performer in the United States, while some innovation are also marketed for meeting social responsibility. For example, an emerging company Boll and Branch in Chatham, NJ, has developed organic, fair-trade, and direct-to-consumer bedding, and dedicated a portion of the revenue earned from the sales of this project to “Not for Sale,” an antihuman-trafficking organization. Another innovation in consumer foods is about nongenetically modified food carried out in a nonconventional way. An engineer by training, who spent months perfecting the recipe for coconut chips, which he needed for his mother’s Thai lettuce wraps, worked on innovative coconut chips with five flavors from Salted Caramel to Original. He developed a family business to export his innovative snacks from Thailand. In 2014, his products won “The Best Snack Award” in the Fancy Foods Show, in the United States, and in 2012, the entrepreneur built a non-GMO certified company known as Dang Foods in Berkley, CA, with the exclusivity of his innovation. Such business projects originate from the startups and grow as companies, provided the innovations are nurtured properly during the business-evolution process.
Another “startup” way of innovation-led marketing strategy can be cited of “Ringly,” an upcoming company in New York City, which combined technology and high fashion to stay connected in a discreet and stylish way in the competitive marketplace. Ringly started with a boom by selling over 1,000 rings in their first 24 hours of business. They are now working to create new additions to their jewelry collection and to develop partnerships with different fashion brands. The former eBay product manager teamed up with other engineers from Stanford, MIT, and Carnegie Mellon University to develop a stylish solution in mid-2013. This company could raise notable funds within short time and could successfully rope-in big investors like Andreessen Horowitz, Silas Capital, and First Round Capital. A conventional insight with modern approach has been coined by three young start-up entrepreneurs who raised a company “Blue Apron” in New York City, NY, with the distribution of farm-fresh ingredients along with the innovative recipes awaking a chef in every consumer.
Innovation is a continuous process, whether in consumer products or industrial goods. Laundry detergent has a chronological evolution of innovation and has gained quick first-mover advantages by transforming the consumer preferences accordingly. The transformation has occurred along many dimensions from hard bar soap, to flakes, to powder, and to liquid over the period. The innovation in the product also distinguished the product attributes from animal fats and vegetable oils to synthetic nonsoap detergents by augmenting the use in high-efficiency washing machines and quality of water, including temperature preferences of hot and cold water. On the green business innovation front, the idea of solar charger consumer electronics has grown the market demand. The Window Solar Charger brought out in the market by several competing niche-led companies can be used to power your smartphone through sunlight from the window. The charger is a rechargeable lithium battery that holds 1400 mAh of electric charge. This device delivers completely green energy, as it is all collected through solar panels on the window-facing side of the device.
Innovative Business Projects: Lessons Learned
In the mid-20th century, the need for innovations in the retail and industrial business has emerged as a pertinent need to drive the business performance and growth. Companies accordingly engaged in identifying the need for innovation, by exploring opportunities to develop innovation with competitive differentiation, build organizational capability and competence to manage innovation process, and allocate resources for carrying out innovation. Most companies wanted their product development teams to create breakthroughs by developing and launching new products that would allow their companies to grow rapidly and maintain high margins. However, exploring innovations for breakthroughs has been expensive and time-consuming for the companies when carried out fully within the organization, as innovators, product developers, and process manager often got lost in the process of achieving breakthroughs due to unclear system within the company to guide innovation. By the mid-1990s, the lack of such system was a problem even for an innovative company like 3M, when it was engaged in developing breakthrough products and the lead-user process. The lead-user process was intended to transforms the task of inventing breakthroughs into a systematic task of identifying the lead users and learning from them (von Hippel, Thomke, and Sonnack 1999). The two common ways of developing and managing innovative business projects have later emerged within and outside of the corporate environment. Most companies consider innovation as a continuous process and invest resources in business innovation projects. However, low-capital innovative business projects are run by the SUEs, who develop the innovation concepts, prototypes, and business plan for large-scale implementation, and look for potential companies to adopt the innovative business project for implementing to scales. The co-creation of innovation and managing innovative business project at various organizational levels have set new trends in the global business environment.
In the new innovation ambiance, companies and startups realize that they have to coexist and identify new ways to influence each other for managing innovative business projects and segment performance. This experience paved the way for the get-into-business stage, in which SUEs and large companies could manage successful businesses. In the process, SUEs learned business discipline from the private sector, while corporations gained innovative insights to lead the marketplace. Increased success on both sides has laid the foundation the co-creating the innovation, in which companies deliver high value to stakeholders. Alternatively, nongovernment organizations (NGO) also actively collaborate with the companies in diffusing the innovation. When Bharat Petroleum (BP) sought to market a dual-fuel portable stove in India, it set up one such co-creation system with three Indian NGOs. The system allowed BP to bring the innovative stove to a geographically dispersed market through numerous local distributors. While the company sold its stoves profitably, the NGOs gained access to a lucrative revenue stream that could fund other innovative business projects (Prahalad and Brugmann 2007).
Companies that are working on innovative projects carry a set of risks. In most large firms, employees are constantly stormed with ideas for new projects, and most often, there exists resistance within the organization. And even if new ideas get the support from the top management, the innovative business projects face many challenges toward their implementation, including finding sponsors, building innovation prototypes to the scale of production, managing capital and resources; and developing competitive advantage of innovation in the market and creating the stakeholder value (Miller and Wedellsborg 2013). The sources of innovation are getting more dispersed geo-demographically as well as industry-wise, and objectives in carrying innovation have shifted from technology to business models. Many innovations now come from simplifying or scaling down the existing products or services and fragmenting the earlier structure of products. Hence, companies should align their innovation plans with the business strategies that could deliver unique competitive advantages and manage stakeholder values. In the past, companies were focused on applying technology to innovate their products and services; however, many firms have recently started to actively license out technology. These firms consider technology licensing for umbrella production of the innovative products simultaneously at various destinations in collaboration with partnering companies for commercializing the innovation rapidly across the markets. The current trends of innovation and organizational approaches toward managing innovations in the global marketplace are exhibited in Figure 1.2.
Most companies are also engaging consumers in the innovation process and learning from their experience in the past with similar products of other companies. Such trend of bottom-up innovation is largely anchored by social network groups connected with the companies as illustrated in Figure 1.2 in reference to public-private innovation, engaging consumers in the innovation process by sharing new ideas and concepts based on their experience. Such experience-led innovations are largely adopted from the societal trends, and innovation concepts are developed for experimentation. Customer-centric companies, such as LEGO, Starbucks Coffee, and Fab India, believe in innovation by creating value creation that will shift the business culture from products and services to experience environments and co-creation of innovations. The experience innovations carried out in the companies not only improve the product or service, but also enable the need-based co-creation of an environment in which personalized, evolvable innovation can be nurtured. The success of customer-centric innovations grows out of individual consumers co-creating their own unique value, and consumer communities on the digital platform support the companies to appropriately diffuse the innovation across the consumer segments. Over the period, consumer networks, social communication, and adaptive learning are fostering experience innovation in the multinational companies, such as Sony, Apple, Microsoft, and TiVo, illustrating the budding trend toward experience innovation (Prahalad and Ramaswamy 2003).
Figure 1.2 Innovation trends and organizational approaches
As most companies are continuously engaged in innovations in the global marketplace, there appears to be escalation in the research and development costs and increase in the risk of commercializing the innovations. Hence, companies are facing uncertainty in innovation adaptation, causing decrease in the product revenues. Companies are facing such risk also due to frequent innovations driving product lifecycles shorter. Though companies are deploying manifold investment toward innovations to gain competitive differentiations, they are finding it increasingly difficult to justify investments in innovation due to embedded risk and uncertainties. Hence, companies are leaning toward open innovation that balances lowering the risk and generating quick returns on investment on innovations. The open innovations tend to lower the development costs of innovation by the greater use of external technology in carrying out the research and development activities. This saves time as well as money, and the firm no longer restricts itself to the markets it serves directly. Open innovation is an emerging model in which companies invite innovation ideas from crowdsourcing and use external ideas, screen them from the point of view of economic viability and technological feasibility of adopting the new ideas. Simultaneously, companies also encourage employees to share ideas within the company or industry group and determine the internal and external paths to market. Open innovation is based on co-created platforms of architectures and systems by the various market players, including consumers, distributors, retailers, and technology experts, who set the innovation requirements and develop an appropriate business model.
Another upcoming trend shows that companies develop collaborative business innovation projects with other companies or SUEs by paying the licensing fee for the innovation adoption or developing joint ventures with the partnering company in innovation over the long term. By working on such terms of reference, companies co-create and nurture innovations with their business partners and ensure substantial revenue from the innovation. In order to derive the benefits of open innovation, companies augment their ability to experiment with new business models and finding ways to work with them (Chesbrough 2007). Building innovation capability in a company requires employing the experimentation process for continuous improvement (Kaizen), conducting experiments and assessing their results to improve the business performance within the company and in collaboration with the partnering firms. Kaizen is the practice of continuous improvement, which was originally introduced to the global marketplace by Japanese companies. Today, Kaizen is recognized worldwide as an important pillar of an organization’s longterm competitive strategy. Kaizen also supports the open innovation business models, and most companies use Kaizen as a tool for sourcing innovation ideas. Companies commercialize selectively the open ideas by deploying pathways to bring the innovation to the market, while internal ideas are processed through channels outside of their current businesses in order to generate value for the stakeholders as well as to build competitive differentiation of the company.
Critical Success Factors
Successful innovation leads to customer involvement and profits, which can be achieved through the co-creation by aligning consumers and market players in the innovation process. Some multinational companies have invested resources, taking advantage of social media to diffuse new ideas and stimulating co-creation of innovative products and services. For many companies, developing innovative products does not occur as a chance or coincidence, but through careful attention to many important criteria. Firms should analyze their innovation practices and capabilities to become more effective in driving innovation as breakthrough and gain competitive advantage. The contribution of employees toward innovation in products, services, or strategy signifies the value and quality of innovation portfolio of an organization, and projects the innovation-effectiveness curve of the company. Breakthrough innovations in markets are a continuous process, which is backed by the distribution, retailing, and services industry. Innovations leading to commercial breakthroughs demonstrate a highly skewed distribution of the use value of inventions, explaining that some are useless, a few are of moderate value, and there is rarely one that qualifies as a breakthrough. Those breakthroughs embed the long tail of innovation, and distribution plays a key role in the break-through process. It is necessary for the firms to account for the total number of inventions a company generates, the average score out of the mean value of those inventions, and to count the number of successful breakthrough inventions.
Successful innovation of new products leads to customer engagement and profits. Some companies have tried investing intensively in research and development. For many companies, developing new products is a hit-or-miss the market task, but successful innovation is not magical. It comes from careful attention to a small number of important criteria. The key question is not how much a company can spend, but the ways to spend money in the innovation process. The return on innovation investment concept correlates directly with the organic growth, and links innovation spending with the financial performance in ways that can lead decision makers to generate higher, more reliable returns on innovation, and research and development. Successful innovations are sustainable in the market if developed with a better understanding of marketing metrics and the way managers use them. Indeed, doing so will enforce the application of accurate metrics that are capable of measuring the financial and nonfinancial impacts of innovation and marketing decisions. Considering that innovation investment decisions involve all product development and marketing divisions and often have a strategic impact within the company, understanding the return on investment for an innovation is assured. Often managers of multitask innovation companies are typically confronted with the need to justify their investments on innovations, defend prospective projects, and measure past and future expenses and outcomes.
It is necessary for the companies to build appropriate innovation ecosystems to carry out the innovation business projects successfully. Leveraging tasks within the predetermined innovation ecosystem reduces various risks related to the manufacturing, project process, and commercialization. Random innovations are characterized by the fundamental types of risk that encompass innovation initiative risks, which are the familiar uncertainties of managing a project, interdependence risks comprising uncertainties of coordinating with alliance or outsourced innovators or SUEs, and integration risks causing the uncertainties occurring during the adoption process across the innovation value chain. Firms that work within the innovation ecosystem and could assess risks holistically in an innovative business project and systematically establish realistic expectations, develop a more refined set of environmental contingencies, and arrive at a more robust innovation strategy could make the innovation successful (Adner 2006).
In order to ensure success in commercializing innovation, companies need to invest substantially in the innovative business projects and allocate resources to manage the innovation process at various stages of the project. Lack of resources, or midterm withdrawals of the innovation projects lead to desertion of the innovation and have low effect on commercialization. Innovation success rates are typically low, and returns are slow if they frequently reverse the innovation at various stages of the innovation path, that also escalates the cost, time, and effect of the commercializing an innovation. This makes innovation initiatives hard to justify when resources are limited and company has inadequate competence in carrying out the innovations. Companies intending to carry out innovations and commercialize them in the marketplace should include the following critical success factors:
Understanding the consumer needs and consumption patterns appropriately
Exploring the opportunities for innovation within and outside the organization
Identifying a compelling innovation business project and setting its development path
Scope of sustainability of the innovation in future
Delineating the innovation agenda and developing a stages and review (stage-gate) process
Ensuring employee involvement, including the top-management executives
Develop a decision model to carry out innovation in teams and integrate the sectional growth of innovation carried out by different teams
Building capability and competence in the multifunctional teams carrying out innovations
Exploring marketplace drivers for managing innovation
Risk absorption and contingency plan during the innovation and commercialization process
Elaborative execution plan, including concept testing, market testing, services support, and creating customer value
Innovations can be successfully commercialized by the companies, provided consumers understand why the innovation is necessary. Thus, companies need to diffuse extensively the prototype experience among consumers and generate awareness about the competitive differentiation of the innovation. Failing to create an appropriate marketplace environment for the innovation, companies might lose the business on innovation or the performance in the battle for resources. The performance engine of innovation is bigger, central to the market power, and can reveal the business outcome based on the strategies of the company. So, the case for innovation has to be made only when it is compelling for the company from the point of commercialization and market responsiveness. Companies should take up innovation projects that have minimum three-year market span with the current generation attributes and may assure market for over 10 years with consecutive generations. For example, iPhone of Apple Inc. and Galaxy series mobile phones by Samsung have innovations over generations and are keeping their marketing share growing in the global marketplace. Before preparing the innovation development agenda, setting stages and review gates, and mapping the innovation path, companies should essentially find response to the questions on how a specific innovation supports the business, and what are the admissible risk tolerance and contingency plans for recovering the business. Companies with clear innovation strategies, decision metrics, and sustainability of innovation push the incremental innovation projects in the marketplace. Breakthrough innovations can survive if the companies have a sustainable decision-making model that is different from the one used for incremental spread over a series of small improvements or upgrades made to a company’s existing products, services, processes, or methods. In order to carry out innovations successfully, companies should promote team culture. The best teams’ project champions, who can make appropriate decisions, get sponsors and develop relevant capabilities and expertise to carry on the innovation process (Govindarajan 2011).
Product innovation is a systematic process, and it needs to be carried out with a fully aligned agenda mapping the tasks, causes, and effects. The development of a new product would not be successful if activities in all stages are not properly networked. A stage-gate model should be followed in carrying out the product innovation process to minimize the risk of failure. This model depicts a conceptual and operational roadmap for moving a new product project from an idea to the launch. This model divides the effort into distinct stages separated by management decision gates. Cross-functional teams must successfully complete a prescribed set of related cross-functional tasks in each stage prior to obtaining management approval to proceed to the next stage of product development. Stage-gate processes have a great deal of appeal to management, because, basically, they restrict investment in the next stage until management is comfortable with the outcome of the current stage. The gate can be effective in controlling product quality and development expense. Stages and gates in the model function as sequential phases and may run into some overlapping activities, especially when they cross the decision points. The stage-gate processes may not lead toward completing tasks in earlier phases to keep them off of the critical path, but they foster a mindset in which the work proceeds sequentially step by step. A newer alternative to the stage-gate process is the bounding box approach, which is essentially a management by exceptions technique, in which certain critical parameters of the project, such as profit margin, project budget, product performance level, and launch date, are negotiated as the bounding box. Firms need to conduct regular checks, so that the process managers remain within bounds (Rajagopal 2012). The stage-gate process begins with the identification and documentation of a new idea in improving business. Tasks associated with the development of the product are then divided into a sequence of logical steps called stages, each of which is preceded by a gate where the attractiveness of the project is assessed. During each stage, a cross-functional project team carries out tasks that result in the completion of defined deliverables, including those related to technological (manufacturing, research and development, quality, and regulatory) and business (sales, marketing, and business development) functions.
A disciplined, managed approach to innovation can make the innovation process more predictable, repeatable, and profitable, leading to better top- and bottom-line results and overall high performance. While many firms believe that innovation is a creative endeavor that cannot be managed, the fact is that an effective innovation requires cross-functional cooperation and accountability throughout the entire process. No innovation is a one-size-fits-all endeavor, and organizations may need to deploy multiple processes, one for breakthrough-type innovations and another for line extension-type based on the improvements in the existing products within the product line. Successful innovators have a portfolio of innovations in the pipeline, ranging from modest line extensions to bigger bets on new ideas or technologies. However, it is wise to keep shorter portfolios and focus on both low and high risk ideas in reference to target markets, where innovative products are set to be launched. Accordingly, companies may manipulate product lifecycles and influence the evolving consumer demands to support innovation. Social media tools should also have the potential to accelerate innovation at all phases of development, from ideation to prototype development to pilot programs to commercialization. The critical success factors of an innovation-led product in the competitive marketplace are associated with the following constituents:
Identifying the right need for product innovation at the right time
Projecting the scope of new products in reference to the elapse time between the stages of the innovation lifecycle
Properly aligning and networking all activities in the product-innovation process
Involving the senior management of the company at each phase of the innovation process
Encouraging cross-functional teamwork and effective organizational leadership to carry the product innovation
Driving a prochange learning attitude among the employees, so that flexible thinking on product innovation may be inculcated to develop an end-user-centric product
Any roaming idea might not seed an innovation. Firms should find rationale to a good reason to nurture an idea to carry out organizational level innovations that may motivate a sustainable business growth. Unless managers understand why innovation is necessary, it always leaps off the core business and drains resources without yielding desired returns. In order to sustain the innovation on the performance parameters of tactical and strategic returns on investment, managers should be able to make the case for product innovation indeed compelling. It is important for the product innovators to foresee the growth and sustainability of innovation measuring the probable elapsed time between the stages of innovation lifecycle. Though history market and consumer behavior of similar or identical products set the future prospects of innovation-led products, firms should recognize tidal forces of anticipated change in the market for the new products and associated services.
Incremental innovation can be integrated into the organizational learning process with clear strategy, rightly placed and measured decision metrics, and management models like stage-gate to create a working platform for all those involved in the innovation process. It is, thus, necessary to involve also the senior management of the firm to run the innovation process through the stage-gate paradigm and review the performance of activities at each stage to open the gate to carry innovation to the next stage. The innovation process is a teamwork, as it involves various functionaries to coordinate at different levels to let the innovative product into the market. Autocratic decision making fails to engage all players in the product-innovation process, including critical stakeholders, while a consensus not based on the rationale sinks every decision to its lowest possible effect. The innovation process does not function without a leadership who can make decisions and engage the team to support those decisions. Companies should develop cross-functional teams to drive steering of insights and mutual responsiveness in performing various operational tasks. The best teams have five critical dimensions that comprise warming, forming, storming, norming, and performing (Rajagopal 2014).
In practice, today’s global competition is more dynamic and multidimensional. The mature industry paradox is that leadership demands differentiation, yet differences are quickly copied. Single-factor innovations tap one competency, and capable competitors can usually match it. Multiple competencies strengthen several dimensions, and in effect, redefine the basis of competition. The “shadow strategy task force” is offered as a method to force managers to relinquish the comfort of the firm’s accepted view of itself. This approach begins with the objective of identifying the strategies and competency that, in the hands of competitors, might be used to attack the firm’s competitive position successfully. Especially critical on the task force are individuals with insight into how customers, suppliers, and competitors view the firm’s products and services. Developing new competency requires constant experimentation. The innovation-imitation-equilibrium cycle suggests that industry leaders teach customers what to demand by defining the current state-of-the-art in performance, price, service, and other dimensions; customers learn to judge competitive offerings against these standards, and the learning effect is cumulative (Werther and Kerr 1995).
There are many ways to categorize the core competencies by developing market-access competency, integrity-related competency, and functionality-related competency. The market-access competency includes the management of brand development, sales and marketing, distribution and logistics, technical support, and so on. All these skills help to put a firm in close proximity to its customers. The attributes associated with competency like quality, cycle time management, just-in-time inventory management, and so on, which allow a company to do things more quickly, flexibly, or with a higher degree of reliability than competitors, constitute the integrity-related competency of a firm. The functionality-related competency leads to the skills that enable the company to invest its services or products with unique functionality and invest the product with distinctive customer benefits, rather than merely making it incrementally better. The functionality-related competency is becoming more important as a source of competitive differentiation, relative to the other two types of competencies. In the growing competitive phenomenon, the companies are converging toward universally high standards for product and service integrity, and are moving through alliances, acquisitions, and industry consolidation to build broadly matching global brand and distribution capabilities. Interestingly, the Japanese concept of quality has shifted from an idea centered on integrity (“zero defects”) to one focused on functionality (“quality that surprises” in that the product yields a unique functionality benefit to the customer). Comparative analysis examines the specific advantages of competitors within a given market and offers structural and response advantages. Structural advantages are those built into the business for example, a manufacturing plant in Mexico may, because of low labor costs, have a built-in advantage over another firms. Responsive advantages refer to the positions of comparative advantage that have accrued to a business over time as a result of certain decisions. This type of advantage is based on leveraging the strategic phenomena at work in the business. Besides, the examination of the business system operating in an industry is useful in analyzing competitors and in searching out innovative options for gaining a sustainable competitive advantage. The business-system framework enables a firm to discover the sources of greatest economic leverage, that is, stages in the system where it may build cost or investment barriers against competitors (Norman and Ramirez 1993).
Innovations in Emerging Markets
Innovations in the emerging markets are sprouting through the manifold growth of SUEs that are sponsored by the large companies in various fields, from consumer electronics to e-commerce and community health to sustainability of product and services. Innovations in the emerging markets are carried on in both business-to-consumer and business-to-business segments that are being nurtured by the sponsoring companies to facilitate the innovation to commercialize and gain quick returns on innovations. The small start-up entrepreneurs in the emerging markets are working on the low-cost and sustainable innovations that deliver desirable results and enhance the perceived use value of the consumers. Accordingly, reverse innovation is pacing fast in the emerging markets, giving a major competitive challenge to the companies intending to penetrate high technology, high cost innovative product in the marketplace. As the emerging markets are responding faster to innovation and technology, the gap between premier and mass or bottom-of-the-pyramid is narrowing down. As a result, the global dynamics of innovation are changing. No longer will innovations navigate the globe in the top-down consumer segments direction, in the emerging markets, they are also flowing in reverse. Reverse innovation guides the managers of the sponsor companies how to make innovation in the emerging markets happen and how such innovations can unlock opportunities in the global marketplace. Reverse innovation has become a think-tank of innovative ideas in the emerging markets and drifting them to flow uphill to markets in Europe and North America. Such trend has thrown immense challenges in the business community as it demands a company to overcome the institutionalized thinking that guides its actions toward managing innovative projects within the organization. The growth of innovations in the emerging markets and the process of their commercialization has been exhibited in Figure 1.3.
The ecosystem of innovation in emerging markets is built around the consumer needs, SUEs, innovation gateways comprising sponsorship, co-creation, open innovation, and reverse innovation, as exhibited in the Figure 1.3. Most innovations are grown in the emerging markets around the ethnic needs of consumers and developed at low cost considering the affordability and adaptability potentials of the consumers in the home market. Often such innovations developed for niche markets are commercialized by the large companies and are modified to fit into the extended geo-demographic market segments. Accordingly, the companies sponsoring the innovation initiatives with SUEs in the emerging markets build capability and competence among the SUEs and determine the lifecycle of innovative products by evaluating the value-for-money consumer perception of these products. The routes to market an innovative product refer to the channels, such as brick-and-mortar stores, online stores, M-commerce outlets, and direct marketing (one-on-one), that help the companies to diffuse innovation in the market as well as to develop consumer outreach to the innovative products. The companies that are engaged in commercializing innovations, either acquired from SUEs or co-created, invest enormous resources in exploring markets for launching innovations, carrying out diffusion of innovation, and creating unique values of innovation by exhibiting competitive differentiation and advantages to the consumers. Successful SUEs in the emerging markets develop strategic partnership with the sponsors or large companies to launch and manage incremental innovations in the competitive marketplace. Such strategic partnerships serve the business-to-consumer and business-to-business market segments in the destination markets.
Figure 1.3 Innovation ecosystem in the emerging markets and commercialization
Most consumer-led innovations have been carried out using the informational technology resources. IT-based innovations are largely developed in emerging markets by the SUEs and shared with the companies for improving their business performance. For example, Eat2Eat.com was an Internet-based restaurant reservation service, covering a dozen cities in the Asia-Pacific region developed by an entrepreneur and former investment banker with USD 1 million of his own capital. The Singapore-based Eat2Eat Pvt. Ltd. has launched this online service facilitating application, an IT-based innovation in 2000 after quickly establishing the capabilities and business model in association with the SUE. Initially, this application received low response and over five years, the registered user base remained relatively small at about 12,000. In the next phase, the company had expanded that user base and hoped that the company could change the way people made plans to eat out. Alike most start-up innovation business projects in the emerging markets, resources in reference to time and money in carrying out this innovative application were limited. Consequently, offering adequate sales and promotions to commercialize the Eat2Eat web-based application had been a challenge to the company (Hardy and Goodwin 2006). Another example can be cited of a small Israeli startup TaKaDu, which had developed an innovative software system that used patented algorithms and statistical analysis to detect problems such as leaks, bursts, and faulty equipment within a water utility’s infrastructure. Such problems caused significant water and energy loss at many utilities, led to service interruptions for consumers, and were only getting worse as the existing infrastructure aged (Ofek and Preble 2013).
Multinational companies are leaning toward the logic of reverse innovation, in which products are designed first for consumers in low-income countries and then adapted into disruptive offerings for developed economies. In this process, the emerging markets play as key drivers and serve as innovation routers. However, only a handful of companies have managed to do it successfully until now. Multinational companies with capital-intensive innovation process, which get the products developed through western designers following time-tested methods, struggle to overcome the constraints and leverage the consumerism of the emerging markets. Managing reverse innovations for large companies hailing from developed countries appears to difficult in reference to matching segments to the existing products, lowering price by removing features, failing to think through all the technical requirements, neglecting stakeholders, and refusing to believe products created for low-income markets that could also have a global appeal. But, companies can avoid these traps by defining the problems independently beyond innovation, reducing the overriding features in the innovative products and improving the functionality. To do so, the companies use the best-available solutions in the emerging markets that could help in lowering the price, analyze technological landscape that could fit into the requirements of the emerging markets, and analyze the value perceptions of stakeholders.
Innovation and technology in consumer and business-to-business products in the global marketplace are growing fast to gain strategic and tactical competitive advantages. Almost every advance in innovation and technology in the consumer products segment is emerging as a breakthrough, and the opportunities for the next generation grow ever longer. Though every emerging technology will change the business or social platforms, only some sustain with the potential to grow generically or disrupt the existing commercial innovation products, service, or technologies. The new technologies and innovative products help in transforming lives of people and work ambience, and rearrange value pools beyond business benefits. It is, therefore, critical that business and policy leaders understand which technologies will matter to them and prepare accordingly. In order to cope-up with the advancing innovation and technology developments in the global marketplace, potential companies should stay on-guards in the market and keep their organizational strategies updated for converging marketing policies with the shifting consumer demand. Business leaders should ensure that organizations continue to look ahead, and drive user-friendly innovation and technologies to improve internal performance as well. However, organizations should also measure the lifecycle of new innovations and technologies, and assess the possibility of penetration of disruptive technologies in the market that could shorten the predetermined lifecycle of innovative- and technology-led products. Disruptive technologies can change the game for businesses, creating entirely new products and services as well as shifting pools of value between producers or from producers to consumers. Organizations will often need to use business model innovations to capture some of that value and drive managers to consider various scenarios to develop a sustainable innovation and technology plan. However, firms may take all precautions while abandoning or undermining assumptions about the threat of market competition and risk to develop strategic business models. In the growing technology market scenario, the emerging market companies will turn as significant competitors and thrive to enhance profit from new technology applications as they become available. The emerging markets will create plenty of opportunities related to smart technology, and they will not be limited to for-profit enterprises.
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