A lot of companies are still clinging to in-house research and development (R&D) to provide new ideas. But they need to seek avenues for growth through products and services that target customers in new ways, and with technology at the core.
An influx of new production technologies is already leading to a transformation of the manufacturing industry. 3D printing, for example, has revolutionised the way companies build things. Unlikely companies such as Airbus – which is exploring how it could be used to build planes – see 3D printing as a cost-effective solution to high competition. As another 1.8bn consumers join the global marketplace in the next 15 years, “the demand for both basic and more costly goods and gadgets with grow”, says a recent McKinsey report. And as demand grows, advanced economies will need to use new technologies to compete with developing economies that have low cost manufacturing and labour.
But it is not just consumers that benefit from new technologies – they can also improve workforce productivity. Today’s workers want the convenience that comes with being able to work anywhere, anytime, on the device they choose.
According to the MIT Technology Review, IBM is one of many large companies that has adopted bring your own device (BYOD). Indeed, 80,000 of its 400,000 employees now reach internal IBM networks using smart phones and tablets, including ones they purchased. It has not been without troubles – compliance issues and security to name but a few – but IBM is looking beyond teething problems to see that BYOD is a good way to build relationship between technology and business.
The Yankee Group has identified cloud computing as another new technology that can increase in-house IT flexibility as well as driving traditional IT departments towards new operating models. By making data more mobile so it can be accessed from anywhere, cloud computing can significantly enhance employee productivity.
A TOUGHER AUDIENCE
A lack of loyalty following the series of banking disasters that started in 2008 means that banks in particular have needed to find new and innovative ways to cater to the needs of younger generations – through technologies like mobile devices, video, and social networking. As an example, Barclays recently held a series of events in Manchester to showcase developments, including contactless payments and personalised debit cards.
In another attempt to attract new customers, earlier this year Barclays introduced Barclaycard Ring – the first “social” credit card to be designed and built through the power of “community crowd sourcing”. Crucially, it offers customers a place to voice their opinions on card decisions and share in profit, tapping into the new business trend of getting customer feedback. The BBC found that Barclaycard Ring has helped to reduce complaints by 50 per cent, and increased customer retention by 25 per cent – resulting in an annual benefit of more than $10m (£6.25m) to the business.
Low customer loyalty and competition are the biggest challenges facing businesses today. Companies have to accept the mantra that the “customer is always right” if they want to achieve success on the level of retailer John Lewis – which kept up its performance levels between 2008-2011, despite the economic downturn. R&D only “provides bandages on a broken model”, write Larry Huston and Nabil Sakkab in the Harvard Business Review. The innovation landscape has changed, and companies need to adapt accordingly. The Review cites Procter and Gamble, which invests $400m (£250m) each year in foundational consumer research (on top of what it spends on R&D) to find new ways to innovate.
Failure to get creative in business models can have serious consequences. In 1999, Netflix launched its subscription-based digital distribution service – a dotcom revolution. It experienced continual success, even in the economic downturn, by acquiring more and more titles and expanding across the globe. However, without altering its fundamental model, Netflix introduced a new pricing strategy in 2011 that led to a price hike for its subscribers. The resultant backlash caused a sudden drop in stock price and a loss of almost 1m customers.
RECIPE FOR SUCCESS
Amazon.com simply started as an online bookstore, but quickly diversified as it realised its business model and infrastructure could be mimicked by competitors. Soon after its creation, it diversified its product range – extending to CDs, DVDs, and so on. In 2006, it developed a web services platform – which is now used by other large companies – that handles orders, payments and shipments. In 2007, it created the Kindle. And earlier this month, it launched a wine site, offering 1,000 wines from around the world. It is this constant diversification that has enabled Amazon to weather recent economic storms.
A 2012 Department for Business report said that “there are strong opportunities for economic growth through technology-enabled transformations”. To do this, company executives need to become more flexible and adapt to today’s new and challenging environment.