VIEW INNOVATION
ROBERT SHELTON BISWAJIT DAS
DIRECTOR, GLOBAL INNOVATION PRACTICE,
PRTM MANAGEMENT CONSULTANTS
Rewire For Recession
These three innovation strategies can help companies not only survive
the downturn, but also thrive when the good times return
T
HESE TOUGH TIMES ARE FORCING COMPA-
nies everywhere into survival mode. In extreme situ-
ations like these, some practices that made sense in
better times need to be abandoned, while others need
to be given greater importance. In today’s globalised
economy, no one is immune.
Yet, with the right strategies, it is possible to not only survive,
but to thrive. Three time-tested strategies are crucial. Throw out
what you don’t need; manage your resources; and convert what
you have into something more valuable.
They will not only deliver significant financial benefits in the short
term, but will also provide an ongoing competitive advantage in
the years ahead. Companies that abandon non-essential projects
24 OutlookBusiness > February 7, 2009
ASSOCIATE,
PRTM MANAGEMENT CONSULTANTS
and manage resources better can realise up to 20% in R&D cost
reductions. Simultaneously, by converting existing products and
services into ones with greater value, a typical company can see
a 2-5% increase in revenues. These benefits can also provide the
cash to survive the next 24 months and the strength to rebound
when conditions improve.
Shed Inessentials
Non-essential projects that made good business sense in the past
may present unacceptable risks now. Instead of developing a new
product that will take a relatively long time to deliver returns on
investment, use the resources to bring top-priority projects to
market more quickly. Consider investing in smaller, depend-
VIEW INNOVATION
able R&D projects that lower product design costs or improve
product quality, thereby reducing customer service and support
costs. Also, look at reducing the features and products of your
portfolio that create too much operating complexity. Then, use
the cash you have saved to bring top-priority projects to market
more quickly.
Even companies that are known for path-breaking innovation
understand the need for a change in their standard practices. For
example, Google has begun ratcheting back on spending, and is
cutting innovation projects and product portfolios to focus on
its core businesses.
In addition to reduction and refocussing, look at improving an
existing process to provide better value to customers. An obvious
place to start is product and service devel-
opment processes that cause unnecessary
product launch delays or design issues.
Take innovation leader 3M. During the
recession of 1991, the design, produc-
tion and marketing teams were urged to
work more closely together. This halved
the development cycle for a new digital
colour proofer, a device that is used in
commercial printing, from six years to
three years.
Improvements to manufacturing, as-
sembly, distribution and management
processes are also good targets for in-
novation. To reduce costs and improve
revenues, Airtel focused on customer life
cycle management and outsourced practi-
cally everything else—from network op-
erations to IT.
Manage Resources
Take a hard look at your employee re-
sources and consider how to leverage
them most effectively for long-term sur-
vival. One excellent option is to establish
partnerships with large global compa-
nies. Procter & Gamble is expanding in One, throw out what you
India. It has moved the entire company
from an R&D approach to C&D—connect don’t need. Two, see if you
and develop—and leveraged innovation
partnerships on a global scale. Currently,
can use your resources
it relies on collaboration for over 50% of
its innovations, a shift from the historic
better. Three, convert
level of less than 20%. what you have into
Another example is GE, which partnered
with India’s Wipro in healthcare design,
something more valuable
manufacturing and sales. The partnership
allowed GE to convert an electrocardiograph device developed for
the US market into a lower-cost portable device suitable for people
in rural India—an innovation completed in just 18 months.
For Indian companies, innovation partnering lowers operat-
ing costs while creating opportunities for increased revenues. As
global companies increasingly look for lower-cost and highly-
talented offshore resources, Indian companies will have more
opportunities to form such partnerships.
Extract Value
Instead of creating entirely new products, leverage existing prod-
ucts and services to meet customer needs better and create ad-
ditional value. Adding a series of services to an existing product
26 OutlookBusiness > February 7, 2009
or service can be a powerful way to boost sales.
Recently, Cisco developed an innovative approach to sell its
new videoconferencing product, TelePresence. Realising that few
customers would be able to afford a capital expenditure of this
magnitude in a downturn, the company decided to sell TelePres-
ence in blocks of time instead. In India, Tata Consultancy Services
(TCS) has created a new model called IT-as-a-service, which of-
fers software, hardware and networking infrastructure to small-
and medium-size companies on a pay-as-you-go basis.
It is also a good idea to reorient existing products and services
to new markets or customers. This simple innovation is often
overlooked, but can be highly effective. Pharmaceutical firm Eli
Lilly developed an internal community of scientists that began
collaborating with outside scientists to
accelerate drug development. Sensing an
opportunity in the marketplace, Eli Lil-
ly created a subsidiary, Innocentive, out
of this community. Today, Innocentive
uses the collaborative approach to solve
problems across a wide range of disci-
plines—business, engineering, computer
science, math, chemistry, life sciences and
physical sciences.
Finally, look for the product or service
change that will work well in the current
market despite the tough economic con-
ditions. History has proved that, some-
times, innovations that come out during
a slowdown turn out to be a resound-
ing success. Kraft, for example, launched
Miracle Whip in the US during the Great
Depression to provide a less expensive
alternative to mayonnaise. In just six
months, Miracle Whip outsold all other
dressings and went on to become a staple
in refrigerators across the US.
Indian companies face similar opportu-
nities in this downturn. The growth of the
Indian auto industry opens the door for
environment-friendly products and ser-
vices. The Bangalore-based Maini Group
capitalised on that by launching a ‘green’
compact-sized car called Reva in India
and G-Wiz in the UK.
Healthcare is another sector ripe for
value creation. India’s large and growing
healthcare needs present immense in-
novation opportunities for any company
that can provide high-quality, low-cost
products and services. These innovations
will find a significant market elsewhere in the world as healthcare
demands continue to grow.
The difficult times we are experiencing today are by no means
insurmountable. In fact, Indian companies are particularly well
positioned to turn these challenges into opportunities. The future
is bright for those Indian companies that adapt their innovation
efforts to meet the challenging times. To be successful, they need
to abandon the traditional innovation approach in favour of prun-
ing the portfolio, wisely managing resources and creating new
value. Success will depend not on how much companies spend
on innovation, but on how well they plan and execute their in-
novation strategies. These companies will not only survive the
downturn, but will also thrive in the years that follow. <