Feb 2, 2004

HBS Working Knowledge: Innovation: What Developing-World Companies Teach Us About Innovation

HBS Working Knowledge prints an article on What Developing-World Companies Teach Us About Innovation:

"Over the past several years, we have identified and studied companies from developing countries that have overcome these formidable obstacles to become some of the most innovative in the world. Among them are CEMEX (Cementos Mexicanos), the Mexican cement giant; Natura, a leader in Brazil's cosmetics arena; and China's Haier, which sells appliances in one of the world's most demanding markets."

Some excerpts:

Know your customers' mindsets—intimately
Innovation comes in two varieties: technology-push and customer-pull. Technology-push—introducing new products based on cutting-edge research—is not an option for most companies in developing countries. As a result, they must rely on the customer-pull approach: finding ways to solve customers' dilemmas without relying on novel science.

Many multinationals entering developing countries pay lip service to serving less-affluent customers but then supply only slightly scaled-down versions of products originally designed for wealthier markets. This approach rarely succeeds. But some companies have committed themselves to understanding the needs of less-affluent customers and using this knowledge to devise creative solutions to customer problems.

Innovate around—rather than through—the technology
Companies such as Samsung or Novartis can drive innovation from their R&D labs, continually translating scientific breakthroughs into new products. In contrast, innovation by developing-country businesses looks very different. In general, the innovations come not from product technology but from all the elements of the business model that surround the product technology, including manufacturing, logistics, distribution, and finance.

Scour the globe for good ideas
One distinctive aspect of the companies we studied was their eagerness to travel around the world to find ideas. This isn't traditional benchmarking, since managers don't simply copy something they see elsewhere. Rather, they take pieces of practice or technology that they find and recombine them in novel ways to solve customer problems. The CEMEX team that developed the GPS system got the idea from a 911 call center they saw in Houston. Having identified contractors' need for just-in-time delivery, the team reasoned by analogy that emergency response teams faced a similar problem of quickly reacting to urgent requests from unpredictable sources. Based on this insight, they studied how the call center dispatched paramedics within ten minutes despite traffic congestion and unpredictable call patterns.