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Inspiring Executing Expert advice on innovating with creativity and discipline from Harvard Business Review INSPIRING &EXECUTING INNO VA TION Harvard Business Review on INSPIRING & EXECUTING INNOVATION Fresh ideas can mean big profits—but only if they make it to market and sell. If you need the best practices and ideas for creating and delivering new products and services—but don’t have time to find them—this book is for you. Here are 10 inspiring and useful perspectives, all in one place. This collection of HBR articles will help you: • Decide which ideas are worth pursuing • Adapt offerings from the developing world to wealthy markets • Plan all-new ventures by testing and tweaking • Tailor your efforts to meet customers’ most pressing needs • Make inexpensive products on a vast scale • Measure and improve innovation performance • Avoid classic pitfalls such as stifling innovation with rigid processes 97832 00 i-viii r1 dd 3/24/11 11:19 PM Page ii The Harvard Business Review Paperback series If you need the best practices and ideas for the business chal- lenges you face—but don’t have time to find them—Harvard Business Review paperbacks are for you. Each book is a col- lection of HBR’s inspiring and useful perspectives on a given management topic, all in one place. The titles include: Harvard Business Review on Advancing Your Career Harvard Business Review on Aligning Technology with Strategy Harvard Business Review on Building Better Teams Harvard Business Review on Collaborating Effectively Harvard Business Review on Communicating Effectively Harvard Business Review on Finding & Keeping the Best People Harvard Business Review on Fixing Health Care from Inside & Out Harvard Business Review on Greening Your Business Profitably Harvard Business Review on Increasing Customer Loyalty Harvard Business Review on Inspiring & Executing Innovation Harvard Business Review on Making Smart Decisions Harvard Business Review on Managing Supply Chains Harvard Business Review on Rebuilding Your Business Model Harvard Business Review on Reinventing Your Marketing Harvard Business Review on Succeeding as an Entrepreneur Harvard Business Review on Thriving in Emerging Markets Harvard Business Review on Winning Negotiations 97832 00 i-viii r1 dd 3/24/11 11:19 PM Page iv Copyright 2011 Harvard Business School Publishing Corporation All rights reserved No part of this publication may be reproduced, stored in or introduced into a retrieval system, or transmitted, in any form, or by any means (electronic, mechanical, photocopying, recording, or otherwise), without the prior permission of the publisher. Requests for permission should be directed to [email protected], or mailed to Permissions, Harvard Business School Publishing, 60 Harvard Way, Boston, Massachusetts 02163. Library of Congress Cataloging-in-Publication Data Harvard business review on inspiring and executing innovation. p. cm.—(The Harvard business review paperback series) ISBN 978-1-4221-6261-3 (alk. paper) 1. Organizational change. 2. New products. 3. Business planning. 4. Creative ability in business. I. Harvard business review. HD58.8.H36943 2011 658.4'063—dc22 2011006055 97832 00 i-viii r1 dd 3/24/11 11:19 PM Page v Contents Innovation’s Holy Grail 1 C.K. Prahalad and R.A. Mashelkar Stop the Innovation Wars 25 Vijay Govindarajan and Chris Trimble How GE Is Disrupting Itself 47 Jeffrey R. Immelt, Vijay Govindarajan, and Chris Trimble The Customer-Centered Innovation Map 69 Lance A. Bettencourt and Anthony W. Ulwick The Innovation Value Chain 89 Morten T. Hansen and Julian Birkinshaw Is It Real? Can We Win? Is It Worth Doing? 119 George S. Day Innovation: The Classic Traps 149 Rosabeth Moss Kanter Discovery-Driven Planning 183 Rita Gunther McGrath and Ian C. MacMillan The Discipline of Innovation 207 Peter F. Drucker Innovation Killers: How Financial Tools Destroy Your Capacity to Do New Things 225 Clayton M. Christensen, Stephen P. Kaufman, and Willy C. Shih Index 247 97832 01 001-024 r2 th 3/24/11 11:20 PM Page 1 Innovation’s Holy Grail by C.K. Prahalad and R.A. Mashelkar INNOVATION, AFTER VANISHING from corporate pri- orities during the recent recession, is slowly making its way back onto to-do lists in corner offices. In most companies, though, the innovation process is coughing and sputtering like a rusty old engine. Not unlike inter- nal combustion, traditional innovation is heading for obsolescence—because parameters have completely changed—and it will take unsuspecting organizations with it. IMost innovation programs are built on the assump- tions of affluence and abundance. The more, the better. Striving for bigger margins is B School 101. However, we see shaken consumers in the United States and Europe asking for inexpensive or value-for-money products and services. We see billions of first-time consumers in China and India—where economic growth is surging and 2 billion to 3 billion people will join the middle class in the next decade—who can afford only the cheapest offerings. We see the rich and the young in both the 1 97832 01 001-024 r2 th 3/24/11 11:20 PM Page 2 PRAHALAD AND MASHELKAR developed and the developing worlds demanding envi- ronment-friendly products and services. Affordability and sustainability, not premium pricing and abundance, should drive innovation today. Companies can respond to the challenge by develop- ing strategies that allow them to create more products with fewer resources and sell them cheaply. The search for lower manufacturing costs and fresh sources of tal- ent will increase pressure on them to globalize, leading to more-complex knowledge chains, supply chains, and cross-border interdependencies. At the same time, the new processes will make products and services accessi- ble to a greater number of consumers the world over. Learning to do more with less for more people, we believe, should be the innovator’s dream. While this undertaking is proving to be a nightmare for many Western companies, our research suggests that a few pioneers in developing countries are showing the way. They design inexpensive products and manu- facture them with so little capital and on a scale so vast that their prices—1 cent for a one-minute telephone call, $30 for cataract surgery, $2,000 for a car—are, by an order of magnitude, the lowest in the world. Faced with shortages of capital, technology, and talent, auda- cious entrepreneurs in emerging markets have had no choice but to overturn accepted wisdom. A potent com- bination of constraints and ambitions has ignited a new genre of innovation. Nowhere is this more evident than in India, which was not exactly famous for innovation until recently. Indians used to joke that it was prophetic that a local 2 97832 01 001-024 r2 th 3/24/11 11:20 PM Page 3 INNOVATION’S HOLY GRAIL Idea in Brief Affordability and sustainability, article provides a framework to not premium pricing and help executives understand abundance, are the new tenets three types of Gandhian of effective innovation. West- innovation that have brought erners are struggling with the corporations success: disrupt- shift in mind-set, but a few ing business models, as Bharti emerging-market pioneers are Airtel did when it shifted its showing the way: They’re focus from average revenue designing inexpensive prod- per user to gross profit and ucts and manufacturing them expanded its market reach; with so little capital and on a modifying existing business scale so vast that their prices— capabilities, as Computational 1 cent for a one-minute Research Laboratories did telephone call, $2,000 for a when it came up with a whole car—are the lowest in the new supercomputer design world. Nowhere is this that used standard compo- approach, which the authors nents; and creating or sourcing call “Gandhian innovation,” new capabilities, as Lupin did more evident than in India. when it reversed the usual Smart companies have used it drug development process to to penetrate the country’s create an affordable treatment burgeoning mass market. This for psoriasis. mathematician had arguably, around 500 AD, invented the number zero—because that was how many innova- tions Indians developed thereafter. No longer can any- one say that. Smart Indian companies have come up with new technologies and radical business models to penetrate the country’s mass markets. They have done this by transforming almost every element of the value chain, from supply-chain management to recruitment, and creating novel business ecosystems. Some describe this phenomenon as an extension of the Indian tradition of jugaad: developing alternatives, improvisations, and make-dos to overcome a lack of 3 97832 01 001-024 r2 th 3/24/11 11:20 PM Page 4 PRAHALAD AND MASHELKAR resources and solve seemingly insoluble problems. However, the term “jugaad” has the connotation of compromising on quality. We prefer “Gandhian innova- tion,” because at the core of this type of innovation lie two of the Mahatma’s tenets: “I would prize every in- vention of science made for the benefit of all,” and “Earth provides enough to satisfy every man’s need, but not every man’s greed.” Affordability and sustainabil- ity were Gandhi’s touchstones six decades ago, and Indian companies have recently discovered their power. In the following pages, we will describe the factors that led to this genre of innovation in India, unveil a framework that will help executives understand this approach, and present some ideas that will allow com- panies everywhere to develop Gandhian innovations. Three Kinds of Gandhian Innovation Over the past three years, we have studied how Indian companies and organizations innovate, often backed by the government. Some are established companies, and others are start-ups. They aren’t confined to a few industries; they run the gamut of manufacturing and services—automobile manufacturing, drug develop- ment, health care, leather finishing, mobile communi- cations, oil drilling, retailing, supercomputing, water purification, wind energy—and cover a range of capital and labor intensities.
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