Market Creating Innovation

market creating innovations introduced a solution to a problem that has either not been recognized before or has not yet been solved market creating innovations develop a new class of customer or a new market take the smartphone as an example smartphones integrated features from a whole range of electronics including phones computers cameras and music and video players and package them into a device that could be carried around in a pocket nearly anywhere in the developed or developing world the smartphone took functions that had been accessible only to the rich and made them available to billions of people all over the world today companies tried to build deep expertise in the different markets they serve to bring about market creating innovations they blend into their local surroundings by blending in they are able to get the knowledge they need to effectively solve unrecognized or unsolved problems for customers for instance Samsung Electronics sends some of its workers on a 12 to 18 month assignment to become regional experts they live in a foreign country learn some of the language understand many of the customs and discover all the customer insights possible during this assignment the employees have no formal tasks except to become experts in the local economy likewise when Unilever maker of Noxzema skin cleaner and ax deodorant sought to build successful operations in rural India the company took a team of their top leadership and dropped them off into a rural Indian village they were there for a month their goal was to learn to think and feel like the rural poor what it means to live in an environment different from their typical customers what it means to have little money and even fewer products to buy the team learned a great deal and built from the ground up a new cells and distribution approach centered on the women of the village the results have not only helped Unilever develop new products but they have also helped them develop new markets deep local expertise would seem to be the cure-all for today's companies trying to create new markets the research provides a cautionary note while deep local expertise is a key element of successful market creating innovation it is not the own element rather market creating innovations require a reciprocal understanding a tie that links the local experts to the global company expert knowledge must be bi-directional with a global company understanding the local environment and the local leadership understanding the global resources but this is not as simple as it seems there are two counterintuitive lessons that companies should follow when trying to successfully innovate for new markets lesson 1 lesson 1 is that market creating innovations are more likely to result from foreign knowledge than local knowledge local expertise can blind the firm to global solutions it's a common belief that innovating for local markets comes from an increased understanding of the unique local environment employees need to connect with the local governments local communities and local customers to really identify the unique local problems but recognizing these problems does not necessarily help companies identify solutions in fact they're deep local expertise can create cognitive biases that hinder an innovative solution to a local problem with deep local understanding companies may begin to perceive that their situation is starkly unique and that innovative solutions will require a novel solution to be built their local expertise blinds them to the products that may have structural similarity to their own for instance a business model in Peru focused on developing an export business for the harvesting of poison dart frogs as pets to children in the US and Europe it turns out that the frogs lose their toxicity once removed from the forest and they make great colourful pets now you may ask where could a firm find a solution to such an idiosyncratic problem at first glance it would appear that you would have to develop a novel solution from the ground up after all what could be similar to poison dart frog exportation the answer for the firm was Indonesian seaweed farming somewhat surprisingly these two projects were structurally similar they involved an international agricultural classification and exportation scheme without deep understanding of the company's total global knowledge the Peruvian subsidiary may have reinvented the solution to the agricultural export problem wasting countless hours and resources ironically the solutions to locally recognized problems require that employees turn to knowledge from technologies designs and systems created outside of their local mandate a myopic local focus even an expert one limits the company's ability to find innovative solutions developed in other parts of the company going to others within the company but outside of the local context allows companies to understand valuable principles behind a product service or system that may help to formulate an innovative solution to a problem that the local market has not been able to solve this leads us to lesson two lesson two is to emphasize principles over templates market creating innovations are more likely to result from knowledge principles than knowledge templates knowledge principles highlight why certain tasks are effective and they enable users to share relevant causal associations to new contexts and situations principles represent key success or failure factors they prioritize and impart broad comprehension of the major cause and effect relationships that must be captured for successful learning in contrast to principles much of what occurs in today's multinational companies is focused on capturing and sharing template type knowledge templates demonstrate what operations entail they convey basic process based knowledge and then provide detailed forms for local subsidiaries to emulate offering a variety of successful examples and characterized by rich detail templates are particularly useful for companies seeking to overcome challenges associated with cause-effect relationships for example what is it exactly that makes mcdonald's effective if we don't know then the template found in manuals and blueprints highlights in detail each step of a given process and how to complete it both templates and principles have proven to be successful tools for company learning however the way these tools are used by companies to solve problems relevant to a particular market may be highly relevant to achieving innovations in foreign markets because principals represent a more general form of learning than templates company subsidiaries in developing countries are more likely to find value by drawing upon the principles related to a technology design or system this provides significant flexibility in determining how to adapt foreign knowledge to a local environment principles provide for a fluid learning experience enabling the user to forego reliance on rigid information sets in favor of directing energy towards adaptation for instance companies like novo tell hotels and IKEA furniture stores purposefully moved away from rigid templates in favor of a principles-based lessons-learned approach this principles based approach enabled them to change existing products and services without destroying what was universally valuable about the product in the first place everybody likes IKEA is Swedish food but some of it needed to be adapted for local preferences furthermore the principles provide a more general framework for future innovations by enabling companies to transfer crucial information about the past success or failure of various products ultimately principle based knowledge allows employees to understand why certain actions should be taken and how to effectively implement a unique solution in a unique environment research shows that companies followed these two lessons tend to improve the local impact of their innovation efforts and increase the likelihood that they will be able to create new markets thus increasing opportunities for growth and future market streams for the company

One Comment

  1. arnel cadeliña said:

    excellent Shad

    June 26, 2019

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