Driving transformational growth through innovation strategy

Game changing innovation is hard. Unlike what most people believe, it is not just the outcome of brilliant ideas, but brilliant ideas executed brilliantly. Whether it be at P&G or Aravind Eye Hospital, innovation demands hard work and several organizations struggle to even get started with it.

That is why we chose to look closely at Godrej & Boyce. It’s journey towards innovation is young and we believe it holds some interesting lessons.

Lesson #1: Boundaries can liberate

Several managers argue removing boundaries and letting chaos reign will unleash innovative energy and lead to discoveries of new growth strategies. While it works in some circumstances, at others this strategy runs the risk of having managers / innovators spending valuable time, money and resources on strategies an organization would not pursue under any given condition.

Paradoxical as it may sound, a creative way out is to orchestrate chaos within set conditions. To do this, the leadership team ought to spend time clearly articulating what the organization’s strategic choices are. These include what it wants to be, what it plans to do and what not to do to get to where it intends to get. The process can be liberating.

The executives at Godrej realized that for the company to grow, it ought to revive growth in its household appliance business, which over that last decade had been hammered down by competitors like LG and Whirlpool.

So instead of focusing its energies on finding ways to build a larger share in small market of consumers, Godrej opted to focus its competencies on finding a way to attract the 80 percent of Indian households who didn’t consume Godrej products.

Lesson #2: Start with the customers’ job

A key lesson from ex-P&G chairman, A.G. Lafley is that the key to successful innovation is a ‘consumer-is-boss’ mind-set. He’d often argue, observing customers can help identify opportunities to innovate. Most often, customers have an important unsatisfied job to be done and either they are not able to adequately address this job today or face barriers which inhibit their ability to get the job done.

Armed with this insight, the team at Godrej thought it is a good idea to get their hands dirty and to figure out where potential gold mines lie. One of the questions they asked was: Why is it that over 80 percent of Indians do not own a refrigerator?

To understand that, they conducted open-ended interviews and videotaped habits of people in rural India. Post a series of ethnographic sessions, they figured the ‘job’ these consumers were trying to solve was elementary – all they needed was an affordable way to preserve leftovers for a day or two and to keep a few drinks cooler than room temperature.

This job was markedly different from the one higher-end refrigerators do and could not be solved with a cheaper strip-down version of the conventional refrigerator. Going to the non-consumers and understanding their barriers to consumption helped Godrej unearth an opportunity to create a new product for the underserved market.

Lesson #3: Build a sand-box for experimenting, iterating and failing

Innovation often involves working in a high-assumption, low-knowledge environment. The good news is that innovators can de-risk innovation by systematically extracting and attacking the most critical unknowns with tailored, low-cost experiments, and increase their chances of success.

Godrej’s team designed and built a prototype cooling unit from the ground up and tested it in the field with consumers. It collaborated with over 600 women in co-creation events to test its original prototypes and several others that followed. The women collaborated with Godrej on every aspect of the product’s design, from designing the interior arrangements to suggesting the candy red color. The outcome was ChotuKool (“little cool”), a top-opening refrigerator unit priced at $69.

Since ChotuKool was unique, Godrej needed to evolve a new business model that fit the market. It worked on several options and finally came up with a new financing plan and low-cost distribution system that generated profits.

Godrej is now in expansion mode and on its path to selling 100,000 ChotuKools in only its second full year on the market. ChotuKool was also awarded the 2012 Edison Award Gold prize for Social Impact.

Lesson #4: Reward the process, not the outcome

The inherently unpredictable nature of innovation makes measuring and rewarding success difficult for companies. A team could do all the right things and still fail, or succeed in spite of doing all exactly all the wrong things.

But by punishing well thought-out experimentation and risk-taking, organizations push managers away from treading the path of innovation. Instead, companies ought to look for ways to encourage courage and learn from unsuccessful efforts. It ought to share failures with employees, reinforce the idea that failures can be tolerated and disseminate lessons learnt that can eventually lead to success.

For example, encouraged by positive feedback from consumers during the concept stage, the household insecticide team at Godrej Consumer Products did a test launch for a new variant of Hit, in select markets.

The team had already invested Rs 20 crore into the launch, the launch dates and even ad creatives. To their dismay though, the product failed to get a `wow’ response they were expecting. To make things worse, the team was too far down the road to tell the management to roll the launch back. But they went ahead and did it.

The senior management saw merit in what they were trying to say and agreed to abort the launch. Not just that, the team was rewarded with Rs 20 crore. Chairman Adi Godrej reasoned it was critical to reward teams for putting in their best efforts. “If we don’t accept failures, how will they try to do innovative things the next time?”

Thomas Edison failed 1,000 times before finding the acceptable filament for the incandescent lamp. The 1,000 failures didn’t deter Edison. He said, “Results? … I have gotten lots of results! If I find 10,000 ways something won’t work, I haven’t failed. I am not discouraged, because every wrong attempt discarded is often a step forward….”

By Rahul Nair & Akshay Mehra
Rahul is an Analyst at Innosight. He specializes in collaborating with clients in medical devices, information technology and pharmaceuticals to identify launch and execute innovations using the disruptive innovation theory. Photography and cooking keep Rahul occupied during free time.

Akshay is a Principal at Innosight. He has worked with clients in consumer product companies, medical devices and pharmaceuticals to identify disruptive innovation opportunities in their industries. Before Innosight, he has worked in brand management at a consumer products company, and was heading a start-up in Bangalore. During his downtime, Crime Fiction and History keep him occupied.

Around 1.3 billion tickets were sold in North America in 2011; that is about the same number of tickets sold a decade ago. This is because the upswing in mobile and tablet usage, and the popularity of streaming services like Netflix and Hulu, have increased the sources for movie consumption, beyond just the theatres.

The upshot to all this has been the trend towards fewer, bigger mass hits like Avatar, X-Men, where big studios release massive number of prints worldwide, support them with mega marketing budgets, and hope to recover their investments quickly and move on to the next big project.

One would assume that the ‘indie’ films [those produced by independent film makers and mostly low-budget flicks] would be the collateral damage in all of this; they would be struggling for funds, equipment and distribution as box office revenues stagnate, but something disruptive is brewing in there!

First, let’s talk about the funding: A 50-minute film adaptation of the play Anomalisa recently raised a record $0.4 million via Kickstarter which is a crowd-funding platform for creative projects.

The Oscar-winning screenwriter, Charlie Kaufman, used a quirky but highly effective video pitch to raise funds from 5,770 people on this site. On Kickstarter, people support these projects because they admire the person they want to support or they are inspired by an idea.

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Platforms like these open up an entirely new avenue for independent film-makers to make films without the interference of the typical studios; this also allows them to stay true to their original idea.

The other trend that is helping indie films is distribution and marketing. New global platforms are helping these films to go beyond film festivals and reach new audiences while also achieving commercial success.

Tribeca, started by Robert De Niro in 2003 as a means to revive the New York film industry post 9/11, has grown large enough to bill itself as a ‘diversified global media company’. It also has a film distribution arm to provide films a platform to attract new audiences and broaden the access point for consumers to experience independent film and media. Tribeca is putting this distribution into play by making films available to home viewers during the festival, showcasing certain films on pay-cable for $6.99 each.

Suddenly, the indie film-maker isn’t competing against the big budget films for a limited number of screens at the theatres. Instead, he has the platform and the means (think Netflix, Amazon) to distribute, and not only recover costs of the film but also make decent profits.

The aforementioned trends are also changing the marketing of films. Typically, a studio would spend a sizeable amount of money on saturating TV and outdoor advertising.

But Tribeca is leveraging what is already the foremost way to market indie movies–word of mouth. Social media tools and their ability to rapidly generate word of mouth at almost zero cost is helping these films break the traditional model of marketing.
Finally, we talk about the disruption in film making technology. Quite simply, cheap high-definition cameras and digital editing tools have transformed the cost model.
The tools and the technology used by big studios are becoming increasingly affordable for indie film-makers to make movies that are as technically polished as the big budget blockbusters. For instance, Skyline, an indie sci-fi thriller, was shot on a small budget but has the look-and-feel of a large Hollywood production.

As you see, a lot of this is being helped by dramatic changes in technology. You now have the ability to reach out to millions of people around the world for the opportunity to ‘pitch’ your idea; there are more channels to distribute your content; and equipment costs continue to go down to allow even indie films to look spectacular.

How should big producers or the ‘incumbents’ reflect upon these emerging trends in film funding, distribution and technology?
All these trends – increasing access, reducing costs, and non-participants in the market – are signals of what we call the Disruptive Change Pattern; and this pattern has run across industries, from computers and tablets to full-fare airlines and budget airlines where the incumbent has lost eventually.

We’ve noticed that the incumbents dismiss startup activities as small, ‘fringe’ ideas, because in the initial stage, the quality of output from the disruptors is just not good enough for the mainstream users. So for all the success of Skyline, the fact is that The Hobbit is going to make a lot more money.

But ignore these disruptors at your peril because industry after industry, we have seen that these pesky disruptors gradually keep improving their quality, develop new (and lower-cost) business models, and one fine day there’s a tipping point, after which the incumbent is completely blind-sided and the king is overthrown.

As we’re seeing in the US, the disruptions taking place at the fringes are helping indie film makers realise their dreams to be truly independent. And at the same time, it might be time for the ‘big boys’ to start paying a lot more attention to these disruptors before they themselves get disrupted.

By Akshay Mehra
Akshay is a Principal at Innosight. He has worked with clients in consumer product companies, medical devices and pharmaceuticals to identify disruptive innovation opportunities in their industries. Before Innosight, he has worked in brand management at a consumer products company, and was heading a start-up in Bangalore. During his downtime, Crime Fiction and History keep him occupied.

Innosight is a strategy and innovation consulting firm. It’s consulting approach is rooted in the groundbreaking concepts pioneered by the Innosight partners, board members, and co-founder, Harvard Business School professor Clay Christensen. Innosight collaborates with senior leaders at the world's top companies to identify and pursue new growth opportunities, build innovation capabilities, and create disruptive new products, services, and businesses.

Innosight is based in Lexington, Massachusetts, with offices in Singapore and India. Starting with co-founder Clay Christensen's classic book The Innovator's Dilemma, Innosight has been dedicated to advancing the understanding and practice of innovation.

Innosight’s partners and network of collaborators extends it’s thought leadership through dozens of books, Harvard Business Review articles, and other content that break new ground in innovation strategy.
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January 25, 2013 08:11 am by Shaheen Hamza
The fourth point could cater to a cash rich company which dips its fingers in multiple pies. In my sense, it wouldn't apply to any small organization or debt-laden firm as one costly failure could even mean doomsday. Rewarding the process sounds paradoxical in this particular case, as either the dea...
January 24, 2013 19:01 pm by How to kick start innovation in your organization | Forbes India Blog | How to scale social innovation? |
[...]   [...]
January 24, 2013 11:25 am by Hiran
Very interesting and good to see more case studies on Indian companies especially belonging to the old guard variety. With increasing focus on R&D by Indian companies(adjudged first in the world in terms of growth in R&D spend) lets hope that this mindset change will also translate to more innovatio...
December 25, 2012 23:51 pm by Govt to discuss means to curb illegal multi-level marketing | Web Marketing System
[...] while also achieving commercial success. Tribeca, started by Robert De Niro in … Read more on Forbes India (blog) This entry was posted in Small Business Web Marketing Platform and tagged curb, Discuss, Govt, [...]
December 25, 2012 03:26 am by Sapan Shah
Interesting article! It would be great to state in other statistics like what is the average change in the ticket prices over a decade, no. of movies released then vs. now. I have been following Clayton Christensen and Innosight for a while now and I will be looking forward to these blogs regular...