Think frugal

Innovation today is both overused and misinterpreted. Innovation is confused with invention. Invention means scientific discovery.

Innovation is simply finding ways of adding value through more effective products, processes, new uses of existing technologies or pathways to markets. Henry Ford did not invent the automobile, but he did find ways to manufacture them more efficiently via the assembly line. Sustainable business innovations in emerging markets must have three ingredients: They must create value for businesses, overcome societal challenges while conserving resources and be in tune with emerging market contexts.

Innovations for Asians by Asians

Indians, because of a carb-heavy and fried-food diet, have the highest incidence of diabetes in the world. Britannia Industries, a biscuit company in India, has risen to the challenge by developing a zero-sugar, no-trans-fat, no-cholesterol, high-fibre, oat-based, nutritious biscuit. But, does it sound appetising? We know that food products that don't taste good don't sell. It took Britannia two years to develop one that passed the taste test. But, what about dipping-biscuits-in-tea tests that every self-respecting biscuit in India must pass? Britannia overcame this challenge as well. Most Western companies would not even have been cognisant of this important hurdle! The result? Sales and profits are each up by 300 per cent in three years - proof that one can do well by doing good.

Affordable innovations

Much has been written about fabled, multi-disciplinary healthcare at Mayo Clinic based in Rochester Minnesota - a destination for many a well-heeled global patient. Contrast that with Aravind Eye Hospital in Tamil Nadu which focuses on high-quality, low-cost eyecare, performing cataract operations for under US$20 (S$24.68). The approaches are very different. The former relishes new challenges. The latter is on the use of up-to-date but existing knowledge to efficiently manage high-incidence health problems in an "assembly line" setting.

Such frugal underpinnings are in part cultural. You have to live and think frugally to be frugal innovators. Responding to challenges posed by Tata Nano, Renault-Nissan launched a frugal design competition between teams of French, Indian and Japanese engineers. The winners? You guessed it - and by a long shot - the Indian team!

Cost of NOT innovating

This year, we have seen the last Kodak moment. Philips has conceded defeat in consumer electronics. Panasonic and Sony are at Samsung's mercy. Dell and HP are now under threat from Lenovo, a company rising out of a previously shrinking IBM Thinkpad. In part, these companies failed to innovate. In part, they did not innovate for emerging markets.

There are two contextual factors that companies in the West often fail to appreciate. First, you have to act quickly. GDP growth rates of 8 per cent mean that consumer markets "carried" by the middle class are often growing at 20 to 25 per cent per year, a fact not appreciated at headquarters in Europe and North America. Delays in marketing investments can leave a company stranded. Samsung stores are everywhere in India. Philips and Sony are hard to find.

Second, one must adjust the business model - pricing, distribution, product design, communications and merchandising across borders in emerging markets. Korea, China, the Philippines, Indonesia and India are different markets. Asian companies such as Tata and Samsung understand and cater to these differences. Others, to their own detriment, often do not. General Electric, recognising this need, has opened its vice-chairman's office in Hong Kong, closer to where the action is.

tabla@sph.com.sg

Professor Rajendra Srivastava is provost and deputy president of Singapore Management University.

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