The 50 Most Innovative Companies (2011)

The rankings for the 50 Most Innovative companies have been released for this year (by a different source than previous) and it’s clear to see how it’s changed from 2010. Although Apple is still number 1, compared to the Bloomberg table of 2010, Google has been pushed down to number 6 by Twitter, Facebook, Nissan and Groupon (according to FastCompany [online], Accessed 16/11/11). However, Fast Company and Bloomberg clearly use different factors when deciding upon the list due to the differences in ranks. No doubt that in Bloomberg’s 2011 listings, Apple and Google will remain in our top two. The debate is, which one is more reliable? We don’t know. Compared to Fast Company’s previous rankings for 2010 however, little has changed over the last 12 months although, shockingly, Apple was ranked 3^rd in 2010.

The reasons for the top 10

1. APPLE : An “ecosystem of creativity” that has changed our lives
2. TWITTER: Re-defining communication
3. FACEBOOK: Attracting 600 million users which out-competed Google by 145% as prime Internet destination
4. NISSAN: “The first mass market all-electric car”
5. GROUPON: “For reinvigorating retail and turning down $6 billion”
6. GOOGLE: Improving the ‘search’ experience as results are found whilst still typing
7. DAWNING INFORMATION INDUSTRY: World's fastest supercomputer
8. NETFLIX: A $9 billion market cap, 20m subscribers and over-powering Blockbuster
9. ZYNGA: The $500 million producer of social gaming
10. EPOCRATES: Easy-to-use drug-reference program for health professionals on mobiles and laptops

The 50 Most Innovative companies according to Fast Company:

Rank	Name	Last Year
1	APPLE	3
2	TWITTER	50
3	FACEBOOK	1
4	NISSAN	–
5	GROUPON	–
6	GOOGLE	4
7	DAWNING INFORMATION INDUSTRY	–
8	NETFLIX	12
9	ZYNGA
10	EPOCRATES	–
11	TRADER JOE'S
12	ARM
13	BURBERRY
14	KOSAKA SMELTING AND REFINING
15	FOURSQUARE
16	ESPN	–
17	TURNER SPORTS	–
18	HUAWEI	5
19	INTEL	14
20	SYNCARDIA	–
21	DONORSCHOOSE.ORG	–
22	EBAY	–
23	NIKE	13
24	LINKEDIN	–
25	WIEDEN + KENNEDY	–
26	YANDEX	–
27	AMAZON	2
28	OPENING CEREMONY	–
29	IBM	18
30	AMYRIS	–
31	DOUBLE NEGATIVE	–
32	KASPERSKY LAB	–
33	PEPSICO	–
34	UNIVISION	–
35	SNOHETTA	–
36	MARKS & SPENCER	–
37	MICROSOFT	48
38	SOLARCITY	–
39	SHAADI.COM	–
40	VOXIVA	–
41	CISCO	17
42	ENERKEM	–
43	SAMSUNG	36
44	PANDORA	–
45	GE	19
46	CHANGCHUN DACHENG INDUSTRIAL GROUP	–
47	AZUL	–
48	STAMEN DESIGN	–
49	FX	–
50	MADECASSE	–

What are your views?

References:

Fast Company [online], Available from: http://www.fastcompany.com/most-innovative-companies/2011/, (Accessed: 16^th November 2011)

The 50 Most Innovative Companies (2010)

Since 2005, Bloomberg Business Week has published a table each year displaying the ‘50 Most Innovative Companies’. The data is gathered by Boston Consulting Group (BCG). The consultancy gathers this data using various techniques. In December 2009, senior executives were emailed around the world asking which companies, in their view, were the most innovative operating outside their industry. With this data, BCG then took consideration of the financial performance for these highly ranked companies. For the final list, survey results account for 80%, 10% from stock returns and 5% for 3 year returns, as well as margin growth.

For the 2010 report, the survey distribution strategy was altered to improve the reflection of each country's share in the world economy; decreasing or increasing the number of questionnaires sent to different countries. The survey was also translated into different languages in an attempt to increase the response rate leading to more representable data.

It seems to be the case that Asian companies are becoming more established in the global market and significantly increase their market share as “In the past decade, as the U.S. was losing an estimated 2.4 million factory jobs to China” (Bloomberg Business Week [online], Accessed: 9/11/11).

As found in the 2010 Bloomberg Business Week report, 15 of the Top 50 are Asian; a significant increase from the figure in 2006 of five. This is evident today where China are trying to export technologies such as wind turbines and high-speed bullet trains to the United States. However, despite the number of companies from outside the US appearing in the Top 25 of the 2010 table, Apple remains number one (as it has done for the past 5 years) with Google as runner-up; firmly representing America.

With an increased amount of Asian companies claiming spots in the Top 25, many other companies from the US and Britain have been pushed further down the table; some even wiped off completely (AT&T).

HTC, a recently well known Asian smartphone brand, was founded in 1997 and produced its first phone using Google’s Android software in 2008. In January 2010, it launched the Nexus One which was the start of many smartphone innovations for the company. HTC is now selling its own smartphones and “roughly a quarter of the company's 8,000-person workforce hold engineering-related jobs” (Bloomberg Business Week [online], Accessed: 9/11/11). This reflects the demand and supply for their products and how they have expanded since being founded. HTC Chief Executive, Peter Chou, believes that “Innovation is not a one-time job—innovation is a journey” (Bloomberg Business Week [online], Accessed: 9/11/11). We are likely to see many more innovative products from this company in years to come – will they ever be able to compete with the likes of Apple? An unanswered question.

As China suffers from its highly polluted air filling the environment, the government is willing to promote the use of eco-friendly cars; helping to make this a viable venture. In addition, the government is also encouraging overall generation in the country. “Beijing has implemented new procurement policies to promote what it calls "indigenous innovation" by requiring locally made technology in certain government purchases” (Bloomberg Business Week [online], Accessed: 9/11/11).

According to statistics, 95% of executives in China said innovation was the key to economic growth compared to 90% in South America and 89% in India. In the U.S., only 72% said innovation was important.

As the recession presses on with tough economic conditions and squeezed budgets, many countries are suffering to finance their innovations; possibly explaining why the innovation budget of the US has fallen to 48%. However, 88% of China executives, 82% in South America and 73% in India said they were raising their innovation budgets this year. In Japan, only 34% of executives aimed to increased their innovation spending. This lack of innovation by the US could be detrimental to their future place in the Innovative Companies table.

Many critics believe that:

“China, Korea, and India aren't all that innovative. Their domestic economies are growing so quickly—and there are so many opportunities to launch tried-and-true business models—that these companies don't need to come up with the Next Big Thing. Sticking with the Same Old Thing suits many companies and investors just fine” (Bloomberg Business Week [online], Accessed: 9/11/11).

There’s no doubt that the recession has been very tough for companies to survive within; especially due to the unstable and unpredictable market conditions; “72% of companies see innovation as a "top three" strategic priority, and 61% of respondents are planning to increase the amount they spend on innovation” (Bloomberg Business Week [online], Accessed: 9/11/11).

For many companies, priorities have shifted whereby innovation has become the lowest priority than it has done so far as focus is now aimed at cost-reduction, increasing productivity and incremental changes (rather than radical).

References:

Bloomberg Business Week [online], Available from: http://www.businessweek.com/interactive_reports/innovative_companies_2010.html, Accessed: 9^th November 2011

Bloomberg Business Week [online], Available from: http://www.businessweek.com/magazine/content/10_17/b4175034779697.htm, Accessed: 9^th November 2011

Bloomberg Business Week [online], Available from: http://www.businessweek.com/magazine/content/10_17/b4175043789498.htm, Accessed: 9^th November 2011 

An insight into the life of a great innovator; Steve Jobs

Steve Jobs shook up the industry. He changed the world.

R.I.P

February 24, 1955 – October 5, 2011

The life of Steve Jobs wasn’t all fame, success and profit. Channel 4's programme (Steve Jobs: iChanged the World) was shown on 2nd November 2011 and gave a unique insight into the life of one of America's most successful innovators and entrepreneurs. The programme explained how Jobs went from being a college drop out to one of the wealthiest and successful men in the world.

He’s frequently been called the genius of modern age providing us with products that have improved our lives, made communicating easier and inspired a new generation. Despite his highly complex developments, Apple’s products require no manual due to their consumer friendly nature.

In an exclusive interview from 1994, it was clear that Jobs wanted to make a difference describing that everything in the World is made by people no smarter than you so you can change it and build your own things that people can use.

His Apple adventure began in 8^th Grade when he became friends with Bill Fernandez and Woz (Steve Wozniak). They were all interested in engineering and electrics. Together, Jobs and Woz experienced their first venture; mimicking telephone router codes for free calls around the World. Computer prototypes were then created and were taken to Homebrew Computer Club when they attracted a lot of attention. This device was the first computer using a computer and a screen to read the data.

Jobs was the persuasive one and convinced Woz to set up in business together. They decided to take on an older but experienced partner; Ronald Wayne. He described Steve as being very business directed and serious. It was agreed following a proposal that Jobs and Woz would each own 45% whilst Wayne would own 10% as the tiebreaker if any disputes occurred. 10% investment in Apple today would equate to over $37bn. Ron was worried about working with them, finding it too stressful so handed back his share and walked away with no regrets. As a result, Robert Cringeley was then hired but paid in stock due to the little capital they had.

It wasn’t long until the second model of the Apple consumer friendly computer device was produced. Jobs used diverse influences to fuel his creativity, such as calligraphy courses. He dropped out of college and studied Buddhism in India; following his Hippy trail. People viewed him as an atypical teenager for his age; asking more serious questions than the average 20 year old. He wanted to understand the true nature of things (known as Zen) which was incorporated into his later products.

In 1979, he teamed up with Xerox Technology to create an improved version of a prototype mouse. If Steve wanted to make it happen, his team had to innovate. This involved a trip to the local chemist to buy some roll on deodorant (acting as the ball) and a local supermarket to purchase a butter dish (acting as the structure).

Great influence, rival and friend, Bill Gates, was a great influence to Steve Jobs. They had been partners for a very long time – Apple’s first two computers used Microsoft software and despite their friendship, there was deeply routed rivalry. By the mid 1980s, at the age of 29, Steve Jobs was one of the richest self made men in America. Many close friends and colleagues have commented on his high enthusiasm about everything.

21 years old – worth $1m

22 years old – worth $10m

23 years old – worth $100m

…Not the life of an average 20 year old!

However, because of this, he knew nothing but success and as a result had huge ambition.

In 1985, John Scully was appointed (Pepsi’s Executive). Jobs trusted Scully but 2 years later, profits faulted and Steve left after a boardroom battle.

Steve soon found his feet again and starting to found a new company (Next) that specialised in educational computers which was heavily funded by Ross Perot. Jobs started with little hesitation, high motivation and was great at encouraging creativity and new ideas.

Jobs invested $5m capital in Pixar, taking 30% of the company and kept investing more and more taking more equity away from the employees because he didn’t want to be embarrassed by failure.

Richard Branson himself said that Steve Jobs was a very hands-on individual who wasn’t good at delegating or praising people but he was still a great success so he must have been doing something right! He knew how to move and how to market ideas; a key to success.

Soon enough, Apple wanted Steve Jobs back. They were in trouble and only he could fix it. It was almost dead and about 90 days away from bankruptcy. It was partly outside investment that saved Apple; Bill Gates came to the rescue with $150m. The public despised Gates and believe that if Apple were to win, Microsoft had to lose – but this wasn’t the case. Many believe that Steve Jobs became a better businessman due to his experience of failure which allowed him to learn from his mistakes. A brand new product was developed; the iMac. Steve took bigger risks and continuously innovated with his intuitive tastes.

Jobs successfully brought Apple back on track. He was at his peak of creative genius and the company was a great success.  His key to success was moving beyond the computer and broadening out its product range to other electronic devices. A vast amount of innovative products were released by Apple and at the age of 50, Steve Jobs was now worth $3.2bn.

Apple’s evolution into the world of music was a great success. Although iTunes killed off many music stores (including Virgin Megastores), half a million songs were being downloaded from this virtual music store on a daily basis and managed to change the lives of the recording artists themselves; including Black Eyed Peas.

However, news struck when Jobs was informed he had cancer. It was until this moment when Steve realised “Life is fragile”. From here, he withdrew himself from the public eye and only kept in contact with close friends and colleagues. After his liver transplant, he was very frail but still set himself a goal each day.

Jobs handed in his resignation letter to the Apple board on 24^th August 2011 with immediate affect; “I have always said if there ever came a day when I could no longer meet my duties and expectations as Apple’s CEO, I would be the first to let you know. Unfortunately, that day has come” (UK2 [online], Accessed 8/11/11). His succession plan named Tim Cook as the replacement CEO of Apple.

On Wednesday 5^th October 2011, the tragic death of Steve Jobs devastated the world.

He had the changed the way we live, communicate and interact.

He will never be forgotten.

Apple still lives on.

References:

Steve Jobs: iChanged the World (2011) [TV Broadcast] Channel 4, 2^nd November. 23:05 hrs.

UK2 [online], Available from: http://www.uk2.net/blog/steve-jobs-resigns-as-ceo-of-apple/, Steve Jobs Resigns as CEO of Apple, (Accessed: 8^th November 2011)

Some useful models

Although the idea of ‘innovation’ may appear to be a relatively new area to the business world, it has been an evolving concept since the 1950’s and has passed through six generations to become one of sophistication and high complexity. Such early aspects include the works of Taylor with ‘Scientific Management’; concentrating on products, processes and of course, innovation itself.

There have been many theories to counter for the numerous generations and stages of innovation. The ‘push’ and ‘pull’ mechanisms symbolise whether a business is consumer-led (market-led) or product-led. Over the decades, the emphasis has changed to a greater focus on the needs and wants of consumers. Whereas previously businesses would create a product and then use marketing as a way to persuade customers that they ‘need’ the product (creating perceived needs), organisations today need to constantly monitor and analyse its target market to keep up-to-date and adapt its products to suit their consumers’ needs. Below is a summary of the models to be discussed;

1950s/1960s – Technology Push model

1970s – Market Pull or Need Pull model

1980s – Coupling model

1980s/1990s – Interactive model

2000 – Network model

Although the above can be criticised for being abstract and broad, the models enable us to understand innovative businesses in terms of the co-ordination with the external environment. The models shown above are referred to as ‘linear models’ because they describe innovation as a linear sequence of events.

Technology Push

The ‘technology-push’ model depicts that innovation arises from “technological developments within innovative organizations” (Conway, S. and Steward, F. 2009:66). This argues that innovation is achieved through the investments in technology focusing on the ‘supply side’ of economics rather than the later models which highlight the importance of the market and consumer needs. This model assumes that scientists make unexpected discoveries which are then developed into prototypes for testing before manufacturing and marketing. Such an assumption is relevant to industries, such as pharmaceutical, but harder to generalise to other industries due to the nature of the work and the way in which innovations are created (Trott, P. 2002:17).

Market Pull

The formulation of this framework was initiated by the findings from studies carried out in the 1960s and 1970s that found the innovation process can be influenced by the marketplace (von Hippel, 1978 cited in Trott, P. 2002:18). This led to a developed focus on consumer needs and strategies were to be devised to satisfy these following on from thorough research and development into the target market. From this research, products and services can be manufactured to match the needs of the market; improving success and competitive advantage. This model highlights the importance of close relationships with consumers and successfully satisfying their needs within a marketplace of intense competition between rival businesses to gain market share. Feedback can also be retrieved from consumers in order to improve existing products to further satisfy its market.

An example to illustrate this could be that of Dyson. Who’d have though of a bagless hovering system?! Although Dyson’s invention was soon replicated by many other rivals, he was the first to enter the marketplace with this great innovation. ‘Market-pull’ is all about creating an opportunity and then developing it. The diagram below is taken from Conway, S. and Steward, F. (2009:67).

However, the above models are out of date and not a true reflection of the innovation process by illustrating what drives innovation rather than how it occurs (Galbraith, 1982 cited in Trott, P. 2002:18). Since the mid 1970s, several other models were developed to compensate for these changes.

Coupling and Interactive models

A more updated framework is the ‘simultaneous coupling’ model which suggests innovation occurs from the combined knowledge of three organisational functions: manufacturing, research and development and marketing. Knowledge within all three of these vital business functions is vital for innovation to work. As argued by Drucker (2007:87), knowledge is a “major creator of wealth”. According to Rothwell and Zegveld (cited in Conway, S. and Steward, F. 2009:68), this ‘third generation’ model process of innovation “represents the confluence of technological capabilities and market needs within the framework of the innovating firm”. The target market can be observed and focus groups set-up to allow a better understanding of consumer needs and expectations, gain customer insight and to provide an improved basis in which to base innovation. This framework focuses on integrating research and development and marketing. Managers are required to create formal and informal relationships as well as facilitating interaction within the internal and external environment; the science base, innovative organisation(s) and the market. The diagram below is taken from Trott, P. (2002:18).

The ‘interactive’ model is a development of the ‘simultaneous coupling’ framework linking technology-push and market-pull frameworks; emphasising the critical interaction between “the marketplace, the science base and organisation’s capabilities” (Trott, P. 2002:19). It can be divided into “a series of functionally distinct but interacting and interdependent stages (Rothwell and Zegveld, 1985 , cited in Trott P. 2002:19). Although the model appears to be linear, the flow of communication is not restricted; allowing for feedback. This framework illustrates that there is no clear starting point implying that innovations can be created from a variety of areas; allowing for great flexibility. The target market can be observed and focus groups set-up to allow a better understanding of consumer needs and expectations, gain customer insight and to provide an improved basis in which to base innovation. The diagram below is taken from Trott, P. (2002:19).

Both frameworks require managers to create formal and informal relationships as well as facilitating interaction within the internal and external environment; the science base, innovative organisation(s) and the market.

Network model

This most recent model, developed in 2000, places an emphasis on external linkages. There are external inputs affecting each business function; marketing and sales, finance, engineering and manufacturing and research and development. The co-ordination and integration between and within each function allows for the accumulation of knowledge over time as a catalyst for innovative ideas to be created. The diagram below is taken from Trott, P. (2002:218) and clearly illustrates the interaction with the external environment.

Overall, it is clear to see how innovation has evolved over time from a historical perspective to one of the modern world. Each model compensates for the changes in the marketplace at the time as we live in a dynamic environment.

References:

Conway, S. and Steward, F. (2009) Managing and Shaping Innovation, New York: Oxford University Press Inc.

Drucker, P.F (2007) Managing in the Next Society, Revised Edition, Oxford: Butterworth-Heinemann

Trott, P. (2002) Innovation Management and New Product Development, 2^nd Edition, Essex: Pearson Education Ltd

Innovation in the phone industry; intense competition

It has recently been reported that Samsung is successfully competing, and possible overtaking, Apple. A Financial Times article written by Song Jung-a and Joseph Menn (Financial Times, Accessed 28/10/11).

Recent statistics demonstrate how Samsung has thrived in the smartphone market “as shipments rose 40 per cent in the third quarter” after ‘shaking off’ technology patents. Despite Apple being Samsung’s main rival, they are also their biggest customer so very few details were release to avoid worsening their relationship.

According to strategic analytics, “Samsung’s rise has been driven by a blend of elegant hardware designs, popular Android services, memorable sub-brands and extensive global distribution”. Despite a decline in iPhone sales in the third quarter, their recent model (the iPhone 4S) received 4 million orders in the first three days of release; a new record for Apple.

Reports show that Samsung is the “world’s second most profitable handset maker after Apple”. Samsung’s profit margin is 16.9% compared to that of Apple whose operating margin was 30.8% in the third quarter. The phone industry is extremely competitive, especially now that Nokia have recently entered the smartphone industry with the clear aim of leading the market over Apple and Samsung.

A make or break moment for Nokia

A video published on the Financial Times website, ‘A make or break moment for Nokia?’ illustrates the importance of innovation, research and market awareness. Daniel Harrahan reports on Nokia’s current and future position (FT Video, Accessed 26/10/11).

A summary: Nokia has recently launched two new smartphones in an attempt to compete with Apple’s recent model (iPhone 4S) and Samsung’s Galaxy Nexus.

There was a time when a high proportion of people owned a Nokia phone, however, this has all changed due to the changing markets whereby Apple and Samsung are now the dominant leaders in the key smartphone market where higher margins are achieved. Despite lost ground in the higher end of the smartphone market, they have been the market leader in the more basic and affordable models which are, today, still popular in the developing world. Nokia’s ignorance of smartphone growth has cost them heavily; leading them to play 2 year catch up (not an ideal place to be in today’s technological driven world). Not keeping in touch with the market and changes in customer wants is very risky; especially in the technology industry which is ever changing.

Stephen Elop, Nokia’s new Chief Executive, believes these recent additions to be a jump into the unknown but have secured a partnership with Microsoft. The Nokia Lumia 710 and 800 are “broadly based on existing software and hardware” but are more affordable Windows phones. Many critics and specialists deem these new releases to be essential for Nokia’s future and “for any meaningful earnings growth over the next few years”. Elop is a highly committed, dedicated and determined individual who believes there is no question that the Lumiar models can challenge Apple and Samsung.

The CEO’s great intention is to be “today’s leaders in smartphone design and craftsmanship” and believes their “tenacity and will” will help achieve this.

He says:

“We will make sure that things we learn along the way are factored into the next things we do so that we are committed to a direction. We know there will be some things that work well and some things where we need to work - that’s ok as long as we are a learning organisation and moving with urgency, we’ll work through those challenges”.

Geoff Blabber, CSS Insight Analyst, reports that Nokia’s “portfolio gap at top end of their device mix and not being competitive in that part of the market has a detrimental effect on other segments and particularly their ability to price competitively against Chinese competitors in the entry level so the top end is crucial”. Specialists believe that smartphones will soon dominate the mobile phone industry and enter the price bracket of basic, feature phones. Therefore, Nokia need to enter and obtain market share in the smartphone market else they will fall behind (ever further) and find it extremely difficult to maintain its name.

It’s not just Nokia that aim to achieve from this re-launch and heavily invested future. Their secured partnership with Microsoft enables the software provided to compete against their rivals; Apple and Android.

Nokia are fully aware of the formula require to compete; knowing what to deliver with regards to hardware and software in addition to the contents and services included. There is a recognised demand for an alternative to the Android and iPhone; illustrating the importance of research and development and the affect this can have on consequential innovative products.

Elop understands that Nokia’s significant changes aren’t going to happen overnight because large investments are required to grow and successfully compete with rivals and dominate the market. Nokia needs to focus on convincing the public to love the Nokia phone again and appreciate its comeback.

Elop: Nokia can compete with iPhone

In an interview with the Financial Times’ Technology Correspondent, Maija Palmer, Elop highlights the hard work involved in these releases (FT Video, Accessed 26/10/11).. Both were developed within 8 months in time for a crucial time of year; the Christmas market. Elop’s transformation plans will take time, one step at a time. However, carries the philosophy of “learn, refine and keep going”; one which is highly motivating for the workforce to drive their innovative and creative ideas. When questioned about Plan B for in case Plan A fails, he responded “Plan B is to make sure Plan A is successful”. This illustrates a highly determined individual who strives to achieve and could really help Nokia’s comeback into the market. The CEO believes that the Lumiar 800 is the “first real windows phone” because it “brings the real forms of differentiation to life”. The Microsoft partnership could ensure that Nokia stay ahead of the market, achieving competitive advantage over its rivals, re-brand and reposition Nokia as the dominant leader they once were.

A key factor for Nokia here onwards is to increase its investments, constantly monitor the market keeping up-to-date and continue to pursue its innovative products.

Elop promises us that there is “a lot more innovation and excitement to come”. We’ll see…

References:

Financial Times [online], Available from: http://www.ft.com/cms/s/2/a49dccce-0148-11e1-b177-00144feabdc0.html#axzz1cBMKtKUD Samsung beats Apple in mobile stakes (Accessed: 28^th October 2011)

FT Video [online], Available from: http://video.ft.com/v/1241782455001/A-make-or-break-moment-for-Nokia- A make or break moment for Nokia (Accessed: 26th October 2011)

FT Video [online], Available from: http://video.ft.com/v/1241772331001/Elop-Nokia-can-compete-with-iPhone Elop: Nokia can compete with iPhone (Accessed: 26th October 2011)

Competitive Advantage; What everyone's talking about...

“There are no ideas that exactly fit customers’ needs ever or for ever”

McKeown, M. (2008:9).

The main aims of achieving competitive advantage is:

• Attracting and maintaining customers
• Keeping out competitors via defensive strategies

Gaining competitive advantage is essential for any organisation regardless of sector, industry and size. In today’s tough economic climate, the retention of existing consumer and acquisition of new customers is one of the many challenges facing businesses. Attempts to achieve this can include marketing. This has shown to be the approach adopted by supermarket chain Asda over one of its main rivals; Tesco. Its continuous ‘price war’ advertisement campaigns aim to retaining its current customers as a sense of security that they are benefitting from the ‘best value’ and acquire Tesco’s (and other competitors’) customers to help them save money. Price wars are a period of intense competition and can potentially drive rivals out of the marketplace through the market share and control of the leader(s).

The product life cycle

The product life cycle is a simple, yet important, concept for all organisations to understand. In an ‘ideal’ situation, a business will have products situated throughout the life cycle to spread risks, costs and success. Whereas previously a product could live on for a sustained period of time with little intervention, the average life of products is now approximately 4-6 months; illustrating the need for constant and continuous innovations. The cycle consists of 4 distinct phases: introduction, growth, maturity and decline (Conway, S. and Steward, F. 2009:128).

To survive in today’s business world, continuous innovation is critical. For example, Amazon began as an online bookseller and has now become an online marketplace for a wide selection of items. Nintendo are another prime example; continuously introducing newer versions of the original NintendoDS. These correspond to customer wants, for example, the NintendoDSXL is for those who require a larger screen if they have eyesight problems. Not only the consoles themselves, but the games are also designed to attract a wide range of ages; satisfying the needs and enjoyment of various customers. For example, one of their adverts for Brain Training involved Terry Wogan whereas the X Factor stars One Direction were used to advertise their new Pokemon range. The above illustrate how improvements can always be made due to the dynamic nature of customers’ desires.

Any organisation that stands still is destined for failure. Constant analysis of competitor activity can shed light on their weaknesses; enabling rivals to improve on these and gain competitive advantage. Strategies can be put in place to lower costs, improves current models and target a wider range of users. Aaker (2005:67) describes the importance of monitoring past and current strategies of competitors; in particular the past strategies that have failed as further attempts may be made in the near future. He also highlights the value of rivals’ pattern of new products or markets to “help anticipate its future growth directions”.

New ideas

When a new product, brand or service launches itself into the marketplace, the public may be wary or suspicious. However, if done correctly and effectively, marketing can help overcome this.

It is important to remember that customers buy benefits now features. What the consumer decides to buy will be dependent on which product they believe displays the most benefits for them which may also be compared to the costs.

Finding a new gap in the market is an ideal opportunity for businesses to produce innovative ideas. Although a high proportion of market share can be gained by the concerned organisation, if proven to be successful, this can be threatened by other businesses guaranteed entrance shortly after with similar products or improved versions. This poses a great concern because although patents and protection are in existence, “no idea can be protected for long, and big ideas can rarely be protected at all” (McKeown, M. 2008:8).

The diagram below is taken from Trott, P. (2002:77). This virtuous circle of innovation relates to Michael Porter’s concept of competitive advantage (1985).  He argued that those companies who were able to gain advantage over their rivals are “able to reinvest this additional profit into the activities that created the advantage in the first place”; creating competitive advantage.

Following on from the above, Trott (2002:174) identifies the short and long term competitive strategies of an organisation. The short term should include the defensive strategy and cover all possible areas to deter new entrant to the market. This could be attained through minor product changes. In contrast, the long term could include the introduction of new products; either to the same customer or entering a new market segment. Such changes could involve radical product development.

Strategies

Aaker, D.A (2008:121) depicts the need for strategies to be meaningful, sustainable, substantial to make a difference. To achieve sustainability of a product, a service or even a brand, advantage needs to be supported and enhanced over time to become a moving target for competitors. In this book, Gillette is used as an example to support his view (2008:121). With their continuous products, one innovation after another, they are able to create an advantage that is difficult for competitors to replicate, follow and exceed. He expresses his views about competitive advantage and explains that the advantage “should be visible to customers and provide or enhance a value position” (2008:122). This can be related to the positioning of a business, both actual and of the customers’ perceptions.

Product portfolio

A business can assess its progress (in terms of products) using the concept of a product portfolio. This enables an organisation to plot the positions of its products and decide where its priorities lie in terms of investment. From using this tool, current, future and desired positions can be analysed. It is important to be able to achieve a balance i.e balance products across all the quadrants rather than concentrate in one particular area. Trott, P. (2002:175)

Such models include the Boston Matrix. This was devised in the early 1970s by the Boston Consulting Group (Mindtools, Accessed 29/10/11). On the horizontal axis lies the market share, on the vertical axis lies market growth. The matrix is divided into 4 quadrants: stars, cash cows, question marks and dogs.

Stars – High market growth, High market share

• Market leaders
• Heavy investment required to maintain position
• Become cash cow when growth slows

Cash cows - Low market growth, High market share

• Mature and successful product
• Little investment required because well established

Question marks - High market growth, Low market share

• Has potential
• Requires high investment to increase market share
• Business chooses which to pursue and which to dispose of

Dogs - Low market growth, Low market share

• Low growth market
• Rarely worth investment
• Not well established in market 

References:

Aaker, D.A (2005) Strategic  Market Management, 7^th Edition, New York: Wiley

Aaker, D.A (2008) Strategic Market Management, 8^th Edition, New York Chichester: Wiley

Conway, S. and Steward, F. (2009) Managing and Shaping Innovation, New York: Oxford University Press

Mindtools [online], Available from: http://www.mindtools.com/pages/article/newTED_97.htm, (Accessed 29^th October 2011)

McKeown, M. (2008) The Truth About Innovation, Harlow: Pearson Education Ltd.  

Trott, P. (2002) Innovation Management and New Product Development, 2^nd Edition, Essex: Pearson Education Ltd

YouTube, Available from: http://www.youtube.com/watch?v=pZzWsHbjLWM, ASDA Price Guarantee Advert – 2011, (Accessed: 27^th October 2011)

Sugar's Juniors

It’s that time of year again for the Lord himself to find his teenager apprentice. The series begins tonight on BBC1 at 9pm. Don’t worry if you miss it, there’s always BBC iPlayer – one of BBC’s extremely useful innovations! 

The Apprentice is designed to test individuals' business skills, ideas, knowledge and their innovative capabilities in a number of tasks that vary each week. The candidates are split into two teams, each with their own mentor; either Karren or Nick. Every week, their performance in tasks is monitored by their mentor and receive feedback in the dreaded boardroom where all is revealed. The winning team receive a treat of Sugar's choice whilst the losing team sit in a café with their hot drinks discussing where it all went wrong; continuously shifting the blame on each other before facing the boardroom yet again. Each week one candidate "Get's fired" until the final where Sugar is left to pick his young apprentice from the two remaining.

Last year’s winner, Arjun Rajyagor, was described as the ‘maths wiz kid’. He won £25,000 to launch a business career of his choice, with support and control from Lord Sugar. According to Sugar he had “that natural business flair combined with intelligence” that “you can’t learn”. Arjun runs a computer repair business from home and is currently at college studying A Levels. He has been offered a place at Oxford University to study engineering science. He will receive his prize when he wishes to undertake his business venture - once approved by the Lord! (BBC News, Accessed 24/10/11).

This year’s candidates: Harry Hitchens, Karren Brady, Lord Sugar, Nick Hewer, Lewis Roman, Lizzie Magee, James McCullagh, Harry Maxwell, Zara Brownless, Mahamed Awale, Hannah Richards, Hayley Forrester, Ben Fowler, Haya Al Dlame and Gbemi Okunola.

I’m lucky enough to know Hayley Forrester so will hopefully be able to interview her at some point during this blog to report on her experiences. It’s all about who you know in the business world; networking is vital.

Towards the end of this completed view, I will compose an overview of the series.

References:

BBC News [online], Available from: http://www.bbc.co.uk/news/10288220 BBC Junior Apprentice won by Arjun Rajyagor (Accessed: 24th October 2011)

BBC Press Releases [online], Available from: http://www.bbc.co.uk/pressoffice/pressreleases/stories/2011/10_october/18/young_apprentice.shtml Young Apprentice: Introduction (Accessed: 24th October 2011)