What is innovation? Scholars and doers lament that innovation is about putting an idea to application, or say commercialization. Does the idea have to be original? Not necessarily. Right from the creation of the first relational database management system to recent advent of 3D printing, history is replete with instances where the inventors haven’t been the first ones to commercialize, let alone earn profits from their creations. It is not so much about generating an idea or even making a prototype, but the ability to put across a concept in a compelling manner. The ill-fated Xerox PARC, the one lab responsible for some of computer science’s biggest ‘inventions’, is a case in point on how a good idea is just the beginning.
A business model in its essence depicts the manner in which value is offered to a customer and money is garnered by the firm. The same technology can be presented as different offerings based on the business model some firm chooses to pursue. Thinking of innovation in terms of product alone, or the underlying technology, is a very narrow view, the one that often harms innovation. For instance, look at the market for second hand-cars, the classic ‘market of lemons’. There are several ways in which cars could be sold- nearby used-car dealers, organized online marketplace (such as OLX or CarDekho), or even you have organized players, like Maruti TrueValue coming in the fray. Each of these models is different, in terms of how customers reach out to them, the two sides of the market, physical or online presence, and even margins, but ultimately, they are all selling cars. Albeit, some are more profitable than others.
Even in the low-tech space, the construction industry has gotten revolutionized with the advent of portable concrete mixers, modular housing, flexible payment schemes, and multi-purpose outlets, amongst others. A truck mounted concrete mixer has replaced those sacks of concrete and the associated handing cost and mess. Similarly, truck mounted DG sets have alleviated the power backup problem at most outdoor or, even, in-door events. Several such instances only fortify the idea that innovation can indeed be low-tech in its nature.
What does this insight leave the budding entrepreneur with? Two takeaways.
Firstly, the competition is no longer ‘on’ products, but rather is ‘around’ products, much in terms of pricing models, channels, inventory schemes, cost structures, and payment options, amongst others. So, even if you are late to a market, or imitate a technology, you can still corner a significant market share by adopting a different business model.
Secondly, innovation need not always be hi-tech, or even tech. A new way of thinking about the target customers, customer engagements, partner incentives, cost structures, and even value proposition, does not always call for hi-tech venturing.
To sum up, the competition is increasingly shifting from products to business models, and that offers tremendous opportunities to budding entrepreneurs.
[About the Author: Pavan Soni is an Innovation Evangelist by profession and a teacher by passion. He has consulted with leading organizations on innovation and creativity. He has also been invited thrice to speak at TEDx. Currently, Pavan is pursuing his Doctoral Studies from IIM Bangalore in the domain of innovation management. More on his work is available at www.pavansoni.com. He can be followed on twitter at @pavan_soni]