Finding a niche

Date: 2015-10-07; view: 483.

(8) Companies that fail to come up with big new headline-hitting blockbusters should not despair. There is plenty of other, albeit less glamorous, areas where innovation can take place. Management thinkers have identified at least three. The roots of Amer­ica's productivity surge lie in a ‘genuine revolution in how American companies are using information technology'. Good companies are using IT ‘to reinvent their business processes from top to bottom'.

(9) Reinventing, or simply trying to im­prove, business processes can offer sur­prising benefits to firms that do it well. The software that runs many business pro­cesses has become an important competi­tive weapon. Some business processes have even been awarded patents. Amazon obviously views its patent for one-click internet pur­chasing as valuable, and there are plenty of other examples, particularly in the fi­nancial-services industry.

(10) Nevertheless, there is no doubt that, patented or not, ‘operational innovation' can add to share­holder value. Why so few companies have followed the examples of Dell, Toyota and Wal-Mart, three of the greatest creators of value in re­cent times? None of them has come up with a string of revolutionary new pro­ducts. Where they have been creative is in their business processes.

(11) While superficially mundane, Wal-Mart's pioneering system of ‘cross-dock­ing' - shifting goods off trucks from suppli­ers and straight on to trucks heading for the company's stores, without them ever hit­ting the ground at a distribution centre - has been fundamental to the company's ability to offer lower prices, the platform for its outstanding success. Is it not over the top, though, to glorify such a common-sense change with the title ‘innovation'? For sure, it does not call for a higher degree in one of the obscurer corners of science. But Wal-Mart did something no competi­tor had ever dreamed was feasible and that was highly innovative.

(12) Companies are being encouraged to embrace other forms of innovation too such as ‘stra­tegic innovation'. Let's take for example Southwest Airlines, a low-cost American regional carrier, and Tetra Pak, a Swedish company whose packaging products are handled at least once a day by most citizens of the western world. Such companies succeed through innovative strategies alone, without much innovation in either the un­derlying technologies or the products and services sold to customers.

(13) Tetra Pak's strategic innovation in­volved moving from the production of packages for its customers to the design of packaging solutions for them. Instead of delivering ready-made containers, the company increasingly provides the ma­chinery for its customers to make their own packages: the fishing rod, not the fish.

(14) But customers can then use only Tetra Pak's own aseptic materials to make their containers. This strips out all sorts of transport and inventory costs from the produc­tion process, for both Tetra Pak and its cus­tomer. It also makes it very difficult for the customer to switchsuppliers.

(15) Southwest's innovative strategies in­clude its bold decision to increase capacity in the immediate aftermath of September 11th 2001, and its carefully timed rolling out this May of competitively priced routes focused on Philadelphia, an impor­tant hub for the ailing US Airways, an air­line lumbered with an expensive legacy (such as highly paid crews). The low-cost carrier ‘is coming to kill us,' said US Air­ways chief executive David Siegel shortly before his recent resignation. And he was not exaggerating.

(16) In his recent book, How to Grow When Markets Don't, Mr Slywotzky and his co-author Richard Wise recommended another form of innovation. ‘A handful of far-sighted companies', they claim, ‘have shifted their focus from product innovation to what they call ‘demand innovation''. They cite examples such as Air Liquide and Johnson Controls, which have earned profits not by meeting existing demand in a new way but ‘by discovering new forms of de­mand' and adapting to meet them.

(17) The French company Air Liquide, for example, was a market leader in the sup­ply of industrial gases. But by the early 1990s gas had become a commodity, with only price differentiating one supplier from another. As its operating income plunged, Air Liquide tried to behave like a far-sighted company: it almost doubled its R&D expenditure. However, it reaped few fruits. An ozone-based alternative to the company's environmentally unfriendly bleach for paper and pulp, for example, re­quired customers to undertake prohibi­tively expensive redesigns of their mills.

(18) The company's savior came serendipitously in the form of a new sys­tem for manufacturing gases at small plants erected on its customers' sites. This brought it into closer contact with its cus­tomers, and led it to realize that it could sell them skills it had gained over years - in handling hazardous materials and maximizing energy efficiency, for example.

(19) After exclusively selling gas for de­cades, Air Liquide became a provider of chemical- and gas-management services as well. In 1991, services accounted for 7% of its revenues; today they are close to 30%. And because service margins are higher, they account for an even bigger share of profits. An ozone-based bleach could never have done half so well.

■ Taken from The Economist

►Translate into Russian:

1. What precisely constitutes innovation is hard to say, let alone measure. It is usually thought of as the creation of a better product or process.

2. Likewise, in the past few decades most of the com­panies that have created truly extraordinary amounts of wealth have done so by inventing great processes, not great products.

1. Innovations frequently disrupt the way that companies do things (and may have been doing them for years).

4. Of such seem­ingly modest innovations are great fortunes made.

5. Much as the company would like it to be as revolutionary as the Mach3 was in its day, the battery-operated vibrating beard-remover is unlikely to be more than evolutionary.

6. Nevertheless, there is no doubt that, patented or not, ‘operational innovation' can add to share­holder value.

1. Where they have been creative is in their business processes.
2. But Wal-Mart did something no competi­tor had ever dreamed was feasible and that was highly innovative.
3. Dell, Toyota and Wal-Mart, for example, have risen to the top of their respective industries by coming up with amazingly efficient ways of getting quite ordinary products into the hands of consumers more cheaply than their rivals.

►Fill in the blanks with a boldfaced word or phrase from ‘The Economist Point':

1. My initial position was pretty __________, but as I was given more responsibility, there was more variety in my job.

2. The company was able to __________ the failure of its main rival and increase its customer base.

3. If you invest in this business venture, you will __________ high dividends in less than a year.

4. Only MBA graduates __________ the body of our management.

5. The senior management team __________ wholeheartedly the revolutionary ideas devised by Peter Drucker and implemented them in the day-to-day operations of the company.

6. Last year there was a sudden __________ in the company's profits from 80,000 to $ 100,000.

7. As soon as a new paper converting machine was installed, the company __________ to produce three-folded paper napkins.

8. In the course of the research on a pain reliever, the R&D of Health&Wealth Inc. __________ a new substance, which shook up the pharmaceutical industry.

►Question/Answer session:

1. What the difference, if any, between innovation and invention?

2. What and/or who sometimes resists innovation? Why?

3. Do you know a company that managed to make breakthrough innovations/inventions thus knocking off its rivals?

►Make a presentation on How to innovate without making blockbusters keeping to the following steps:

· Innovation: what is it?

· Innovation vs. invention

· Looking for blockbusters is a daunting task today

· Three additional areas where innovation can take place:

Ø Operational innovation (Wal-Mart)

Ø Stra­tegic innovation (Southwest Airlines and Tetra Pak)

Ø Demand innovation (Air Liquide)

►Give real examples of the types of innovation introduced in the table. Use any source you need.

‘PREPOSITION' POINT

►Fill in the blanks with the correct prepositions:

1. Teamwork has taken ___ broader implications today.

2. The saturated market poses a great threat ___ many existing products.

3. Launching a new product on an experimental basis before starting a full scale production is a useful tool ___ monitoring and evaluating a prospective market share, and adapting this product ___ consumers' preferences.

4. There is a always a scope ___ conflict between shareholder and stakeholder interests.

5. Responding ___ strong competitive forces is a great concern for many businesses.

6. Business analysts attribute G-Motor's unquestionable success ___ its CEO, who keeps a close eye ___ each competitors' move.

7. In my office employees are used to addressing each other ___ their first names.

8. This merger will enable us to create a solid base ___ the supply ___ products and services ___ competitive prices.

9. At the last meeting we held a lively debate ___ the matter of a new cross-divisional task force.

10. The question of shared leadership turns ___ issues of delegation and empowerment.

11. ___ the chairmanship of Greg Lebowsky, G-Motor Inc. has entered the market ___ a large scale and become known ___ the world's best manufacturer of motor vehicles.

‘PUZZLE-2' POINT

►Translate into English using the verbs from Puzzle-5 Point, Unit 3:

1. Председатель совета директоров созвал срочное собрание акционеров, на котором сообщил, что на фоне текущего финансового кризиса и полной неопределенности на международном рынке необходимо детально изучить и пересмотреть деятельность концерна с тем, чтобы устранить отрицательные последствия спада экономики.
2. Директор по маркетингу назначил несколько проектных групп из числа работников различных подразделений. Цель проекта – осуществить честолюбивый план, который будет способствовать дальнейшему росту и процветанию компании и позволит ей преобладать на рынке высоких технологий.
3. После последней серии несвоевременных поставок, NatureProducts пришлось заново восстанавливать деловые контакты с большинством своих бывших клиентов. Количество заказов резко сократилось. В результате за второй квартал компания выручила 1 937 000 рублей, что в три раза меньше предыдущих показателей.
4. Понятие «устойчивый экономический рост» прежде всего подразумевает следующее: (1) компания налаживает прочные взаимовыгодные отношения с внешним миром, (2) бережет невозобновляемые источники энергии и не наносит вред окружающей среде, (3) следит за качеством производимой продукции и предоставляемых услуг.

‘TRANSLATION-5' POINT

►Translate into English using the expressions in brackets:

(1) Концерн «GS» был образован в декабре 2000 года в результате слияния «Gear Corporation» и «Sucaba Manufacturing». На сегодняшний день «GS» является ведущим производителем легковых автомобилей и внедорожников (passenger cars and sports utility vehicles), а также крупнейшим мировым производителем коммерческих автомобилей (commercial vehicles), включая автобусы. Основу стратегии «GS» составляют: глобальное присутствие, широкая палитра модельных рядов (product range), лидерство в применении новейших технологий (technology leadership) и узнаваемые (раскрученные/признанные) (strong) марки (брэнды).

(2) В 2000 году «GS» открыла офис своего представительства (the Representative Office) в России, ставшего первым представительством иностранной автомобильной (automotive/car) компании в стране. На сегодняшний день ее обширная дилерская сеть (dealership network) насчитывает более 50 партнеров. В компаниях «GS» в России работает более 500 сотрудников, а с учетом сотрудников дилерских предприятий по всей Российской Федерации ее штат достигает 3500 человек. Сегодня «GS» является одной из самых известных автомобильных компаний в мире, предлагающей широкий спектр уникальных брендов. Помимо легковых и грузовых автомобилей, а также автобусов (cars, trucks and buses) «GS» предлагает техническое обслуживание (technical assistance) и инновационные финансовые услуги, что позволяет ей отвечать на любые пожелания клиентов с максимальной гибкостью. Кроме того, «GS» работает над укреплением сотрудничества в сфере высоких технологий (technological cooperation) с ведущими российскими научно-исследовательскими институтами. В своих действиях этот международный концерн неизменно руководствуется политикой социальной корпоративной ответственности (social responsibility policy), инициирует и поддерживает важные для российского общества социальные и культурные проекты. Являясь (As) частью мирового бизнес-сообщества (world's business community), «GS» день за днем достигает наивысших результатов (utmost results) в своей деятельности по всему миру.

‘CHECK' POINT

►Question/Answer session:

1. Explain how the location of a business can influence its success. Why might one business want to locate close to its suppliers, while another business might want to locate close to its customers?

2. Identify different groups of stakeholders of a business. Describe how they can influence the activities of a business.

3. Explain the main features of SWOT and PEST analyses.

4. Explain the main features of Michael Porter's model.

5. Why do companies today have to keep to ‘innovation' mindset? What ‘innovative' lessons should they learn?

6. Explain different types of innovation. Use specific examples to support your answer.