The Other Side of Innovation: Solving the Execution Challenge, Vijay Govindarajan

Summary

The speaker from India emphasizes the need for innovation to include the 5 billion poor in the global consumer base. Innovation is defined as converting non-consumers into consumers, exemplified by Tata Motors' $2,000 car. The speaker argues that innovation is non-routine and unpredictable, requiring a dedicated team with a startup culture. Creativity is distinguished from innovation, with the latter being about commercializing ideas. The script also discusses 'reverse innovation' and three key principles for successful innovation: forming a dedicated team, linking it to the core business, and evaluating performance based on testing future assumptions.

Takeaways

• 🌐 The world is divided into two groups: the wealthy who can afford products and the poor who rely on charity.
• 🚀 Innovation is necessary to include the 5 billion poor into the consumer base, as they cannot afford current products.
• 🚗 Tata Motors' Tata Nano is an example of innovation that converted non-consumers into consumers by offering an affordable car.
• 🤔 Innovation is a mystery even for the most successful companies, as it is non-routine and unpredictable.
• 🏢 Organizations are designed for efficiency, not innovation, which is why innovation struggles within established structures.
• 👥 Innovation should be the responsibility of a few, not the majority, in an organization focused on efficiency.
• 🛠️ Skunk works can foster innovation but must leverage the core business's capabilities to be successful.
• 💡 Innovation is not just creativity; it's about commercializing creativity and making money from it.
• 🔄 Reverse innovation involves creating products in poor countries for rich countries, presenting a significant opportunity.
• 📈 For successful innovation, create a dedicated team, link it to the core business, and evaluate it on its ability to test future assumptions.

Q & A

What is the current division of the world's population according to the script?

The script suggests that the world's population of 7 billion is divided into two groups: 2 billion who are rich enough to buy products produced in the US, and 5 billion who are considered poor and are left to charity and government care.

Why is it necessary to bring the 5 billion poor into the consumer base?

It is necessary to bring the 5 billion poor into the consumer base to create a larger market and economic growth, as well as to reduce poverty and improve living standards.

What role does innovation play in bringing the poor into the consumer base?

Innovation plays a critical role by creating products that are affordable and accessible to the poor, allowing them to become consumers. It involves creating new products that cater to the needs and budgets of the previously non-consuming population.

Can you provide an example of innovation mentioned in the script?

An example of innovation mentioned in the script is Tata Motors launching the Tata Nano, a $2,000 car, which made automobiles accessible to people who were previously non-consumers of automobiles, specifically the two-wheeler population in India.

Why is it difficult for companies to engage in breakthrough innovation?

It is difficult for companies to engage in breakthrough innovation because most companies don't have many opportunities to do so, and there is a lack of information and experience to draw from to get it right. Additionally, established companies are often designed for efficiency, which is the opposite of the non-routine and unpredictable nature of innovation.

What is the difference between innovation and creativity according to the script?

Innovation is not the same as creativity. Creativity is about coming up with ideas or big ideas, while innovation is about commercializing those creative ideas, making them profitable, and bringing them to market.

Why can't innovation happen inside an organization built for efficiency?

Innovation cannot happen inside an organization built for efficiency because such organizations are designed for repeatable and predictable tasks, which is the opposite of the non-routine and unpredictable nature of innovation.

What is the role of a dedicated team in innovation according to the script?

A dedicated team for innovation should be created as if it is a startup, separate from the core business but linked to it. This team should have different performance metrics, culture, and human resource policies to successfully innovate.

What are the three important principles for successful innovation in an organization?

The three important principles for successful innovation are: 1) creating a dedicated team as though it is a startup, 2) ensuring the dedicated team is separate but linked to the core business, and 3) evaluating the team's performance based on their ability to test assumptions about the future, not just short-term financial results.

What is reverse innovation and why is it considered a mega opportunity?

Reverse innovation is the process of innovating in poor countries and then bringing those products to rich countries. It is considered a mega opportunity because it can lead to new markets and growth, as well as challenge traditional assumptions about what products are suitable for different markets.

What is the challenge General Electric is facing according to the script?

General Electric is attempting to focus simultaneously on efficiency and innovation, which is a challenge because these two goals often require different organizational structures and mindsets. The script suggests that most companies, including GE, struggle with this balance.