I’M SHOCKED AT HOW LITTLE THE TOPIC of ‘innovation’ appears in the dialect of MBA students. While ‘leadership’ is at the forefront of skills expected to be acquired during a typical 12 week course, innovation takes a back-seat. Yet, to remain competitive, and therefore profitable, innovation must arguably remain the numero uno for any business. Although innovation is measured via the improvement of goods and services, operational, organisational and marketing processes, there is a tendency to focus more on the profitability or cost savings, before anything is truly labeled ‘innovative’. But this is shortsighted.
[quote float=”left”]Innovation is therefore a response to a change in the environment. And change is constant.[/quote]You don’t have to look too far through the business almanacs to find evidence of companies who fell off the gravy-train because they failed to innovate. Take Finnish company Nokia, for example. How did a company with a business history spanning 150 years fall from being an industry leader to a has-been in less than five years? Or Kodak, a company that held 90% of the market-share in the twentieth century, but ended up going bankrupt with the emergence of the digital camera? You guessed it – a failure to effectively and efficiently adapt to change equals a failure to innovate. Charles Darwin was talking about animals when he wrote that ‘it is not the strongest of the species that survives, nor the most intelligent, but the one most responsive to change’, but he could very well have been a management consultant.
Innovation is therefore a response to a change in the environment. And change is constant.
Unfortunately, many developed countries are lethargic to respond to the changing business environment. Australia is one of many countries that has felt first-hand the negative economic and social impact which results in minimal innovation in managerial practices. The clothing and auto industries have been particularly affected with the failure by Bonds to compete with the lower overheads and production costs offered by their Asian competitors, and Ford’s failure to produce cars that meet the low-petrol consumption needs of its customers. Both household-names have derailed, not because of leadership, but from a lack of innovation to a changing market. [quote float=”right”]Unfortunately, many developed countries are lethargic to respond to the changing business environment.[/quote]
The world’s financial sector is another market segment feeling the effects of a lack of innovation as companies struggle to keep up with the plethora of competition and the push towards a cashless society. Specifically, the rapid emergence of Alipay, Paypal, and Applepay is causing tremors across the international payment environment. Jack Ma, owner of Chinese Alipay, introduced an innovative cross-border E-payment system utilising the world’s biggest bank, China Construction Bank (CCB), and partner merchant websites to meet payment solutions. Currently, Alipay has more than 550 million users with in excess of 8.5 million transactions every day. The continual growth of this ‘rookie’, and others like it, in the financial markets is already having significant impact on established players that include Visa, MasterCard and American Express.
[quote float=”left”]Currently, Alipay has more than 550 million users with in excess of 8.5 million transactions every day.[/quote]And this innovation isn’t just limited to China. According to a February 2014 feature, titled Asia will be tomorrow’s driver of global innovation of the South China Morning Post, Asia is now outranking the West in R&D spend. This is ironic, given Asia’s reputation for being only a copycat. And yet, it is this small, gradual improvement that is very much a quality of innovative Western companies. Lou Gerstner, former IBM CEO, believes that the test of a true leader is that they keep the company changing in an incremental, continuous fashion.
So given the paramount importance of innovation in all aspects of a company’s very being, shouldn’t we be equipping tomorrow’s managers and CEOs with not only traditional ‘leadership’ skills, but ‘innovation’ as well? Maybe an MBI, or a Masters in Business Innovation, is the next innovation in university offerings!