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Make it new or pay the price

Firms show more willingness to tackle innovation

The bigger picture


A strong argument could be made for innovation being the most important means by which manufacturers can create competitive advantage. In the short-term, struggling rms might have to concern themselves with any number of immediate issues, from lay-offs and cost reduction to greater operational efciency. But in the long run, the case for innovation becomes well nigh indisputable. When the nancial climate is tough, it is common for companies to take the pragmatic and somewhat cautious view that innovation can go on the back burner until better times return. However, as David R. Brousell reports, the last two decades have seen a growing number of US manufacturing rms taking the more proactive view that innovation can protect them from the worst of the recession (Brousell, 2010). The ndings come from Managing Automations fourth annual reader survey on innovation, in which more than 200 of the magazines readers explained how their companies generate new ideas and generally manage the whole process of innovation. The survey reveals that companies are showing a greater openness and willingness to cooperate in order to facilitate innovation. Among the ndings, 30 percent of respondents say that they have formal collaboration arrangements with outsiders, which seek to develop innovations jointly, and almost 29 percent say that collaborations have genuinely produced a return on investment. More than a third of customers and partners outside the organization can submit an idea for innovation. It has to be acknowledged, however that more than two thirds of companies admit that they have no systematic process which stores and tracks innovative ideas. This typies the way that some statistics seem to provide a more positive message than others. For example, last year only 29 percent strongly agreed with the notion that their company continually trained employees and gave them necessary resources for innovation. However, 58.6 percent of respondents said that their company actively encouraged a climate of curiosity and open dialogue, a rise of 7 percent on the previous year.

Need to change
The surveys overall ndings do indicate a change in the way companies think about innovation and Broussell believes that there might be a link here with the way the manufacturing business as a whole is heading. Businesses now seem to appreciate that they need to change, with almost half acknowledging that this is the only way that they will be able to innovate successfully. The polls do, however, point to a worrying gap between intention and implementation: while 55.1 percent of respondents saw innovation as a strategic initiative, only 32.4 percent say that they have put in place a core set of metrics to determine the effectiveness of innovation

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STRATEGIC DIRECTION

VOL. 27 NO. 8 2011, pp. 18-21, Q Emerald Group Publishing Limited, ISSN 0258-0543

DOI 10.1108/02580541111146830

efforts. A similar gulf can exist between idea generation and innovation programs. Lisa Bodell, CEO of futurethink, says that: They [companies] must also develop a strong strategy around innovation and execute the process seamlessly. Strategy and process, she argues, might be two of the tougher and less exciting parts of the innovation process, but good ideas on paper will remain just that if they are not addressed adequately. One aspect of innovation that should be treated with caution is the notion that new ways of doing things are always the best. Technology opens many doors, but that doesnt mean it should be used to open every door. Some French companies are trying to engage customers by more traditional means. They can see that technology might change the way consumers behave, but its use does not always encourage development of good relationships. The French seem to have a better understanding than many of their European neighbors of the need to engage personally with customers, and this is reected in the countrys lower use of social networking sites. In 2008, only 20 percent of the French visited social networking sites. It reached 36 percent the following year, but that statistic is still behind the UK, Spain and Italy with 43, 52 and 59 percent, respectively. As Larry Kramer reports, the French have looked for other ways to improve their relationship with customers, seeing social media technologies as a complementary way of going about business (Kramer, 2010). One reason for their reluctance to engage too heavily with social media such as tweets is that it does not allow for a two-way conversation. And if the one-way conversation takes on a negative tone, it is not easy for companies to do anything about it. You could argue that if the telephone had been invented after e-mail and social media, it would have been seen as a remarkable step forward i.e. you can actually talk to people. Perhaps that was the thinking behind Nespressos (a subsidiary of Nestle) decision to make the telephone the companys most important technological weapon. Kramer quotes Arnaud Deschamps, President of Nespresso France, who says: in France, when people have problems they prefer human contact . . . they prefer to go to a boutique or call.

Make the call


Nespressos website has signicantly altered customers ordering habits; now, only 20 percent of orders are by phone. But far from cutting investment in call centers, Nespresso has invested more heavily in them. Apparently, customers still like to communicate this way, and learn more about the product, even if they are not actually buying. Nespressos global customer relationship centers handle 12 calls a minute, 24/7, and staff are positively encouraged to engage in conversation with customers on the subject of coffee. Deschamps is convinced that this is paying dividends, with word of mouth from existing customers accounting for half of sales, and Nespresso is by no means alone among French rms for its policy of seeing call centers as good way to engage with customers. This relationships-matter policy also works in France even among businesses that are technologically driven. Vente Privee, a web-based luxury-goods discounter, owes its existence to a rather unattractive characteristic of Western consumers: the desire for bargains without being seen trying to hunt them down. Vente Privee offers huge discounts on designer clothing via the internet. However, its success is partly down to the ability of the business founder, Jacques-Antoine Granjon, to build strong relationships with the suppliers,

The French seem to have a better understanding than many of their European neighbors of the need to engage personally with customers, and this is reected in the countrys lower use of social networking sites.

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. . . although consumers might well be sympathetic to environmental issues (indeed there was a strong bias towards green consumers in the sample), this does not necessarily translate into making the switch to green electricity.

by listening to them and addressing their concerns. Even where a business is technology-driven, the relationships matter. Ritsuko Ozakis focus, ultimately, is on resistance to innovation the limits placed on innovative activity by consumers reluctance to buy into the concept (Ozaki, 2011). His article looks specically at sustainable innovation in the form of green electricity. Such environmentally friendly products might seem to bring advantages that make their success a certainty. However, their diffusion into the market place has so far been a slow process. An examination was carried out into the motivation of consumers who might, or might not, adopt a green electricity tariff. It consisted of focus group discussions, a questionnaire survey with 103 respondents and interviews with ten people. The most signicant overall nding was that although consumers might well be sympathetic to environmental issues (indeed there was a strong bias towards green consumers in the sample), this does not necessarily translate into making the switch to green electricity.

Green but inferior?


Key factors that might reasonably be expected to sway their decision are awareness of positive benets and consequences to the change, compatibility with own beliefs, social inuences, ease of adoption, and risks (will it be more expensive and will the quality be inferior?). These issues were all aired at the interviews, in which skepticism about the value of green tariffs emerged as a signicant factor differentiating the high intenders and the adopters. This is sometimes the result of people being misinformed. One adopter said: I mentioned it [green electricity] to someone, theyd heard in Germany they have wind power, they have very unreliable electricity, dim lights. But skepticism can be justied. A high intender interviewee who said: Green tariffs from all major companies are a joke. They dont actually reinvest your money in green power, based his view on research and what he had read in The Ecologist magazine. And it is certainly true that many green tariffs fail to deliver the claimed environmental benets. The controllability factor in changing to green electricity cannot be underestimated. Even one adopter interviewee admitted that switching from previous contracts was a little bit more expensive and a bit tricky, but not really difcult, it was the same as changing banks. The high intender who said that changing tariff requires thinking and research and involves hassle probably spoke for many people. Such transactions in the UK, including those that involve banks, can be a soul-destroying experience. Ozaki identies the key challenge in promoting green electricity as lling the gap between intentions and actual behavior, seeing this as the best way to counteract the contradictory and sometimes hypocritical stances that can sometimes inhibit people. All the factors identied as being of most concern to consumers need to be addressed in order to ensure that people make the crucial shift from intention to adopt to actual adoption. Suppliers will therefore need to engage more closely with consumers and communicate clearly and consistently the benets of adoption, address issues of cost and difculty in making the switch. Both the Government and local councils have a part to play in getting across the message that adopting a green tariff can make a difference. This can start in

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schools and continue into further education. Both society and the markets benet from innovation. The message has to be that sustainable innovation, as much as technological and manufacturing innovation, has to be perceived as the norm, the road down which society must go.

Comment
This review is based on A new model for innovation, by David R. Brousell; How French innovators are putting the social back in social networking, by Larry Kramer; and Adopting sustainable innovation: what makes consumers sign up to green electricity? by Ritsuko Ozaki. Broussells article provides a useful snapshot of company attitudes to innovation. It offers grounds for cautious optimism, so long as the right mechanisms are put in place to ensure that good intentions are translated into something more substantial. Francophiles always believe that the French way is the best way, and they will enjoy conrmation of this in many of Kramers observations, even if the case is made by reference to just a handful of companies. As Ozaki observes, it is the gap between good intentions and actual practice that needs to be lled in relation to sustainable innovation. There are some particularly illuminating observations by interviewees.

Keywords: Communications, Consumer behaviour, Product development, Product innovation, Manufacturing systems, Social networking sites

References
Brousell, D.R. (2010), A new model for innovation, Managing Automation, Vol. 25 No. 9, pp. 28-33, ISSN 0895-3805. Kramer, L. (2010), How French innovators are putting the social back in social networking, Harvard Business Review, Vol. 88 No. 10, pp. 121-4, ISSN 0017-8012. Ozaki, R. (2011), Adopting sustainable innovation: what makes consumers sign up to green electricity?, Business Strategy and the Environment, Vol. 20 No. 1, pp. 1-17, ISSN 0964-4733.

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