Many service providers are focussing on vertical integration and standardization today; they have idealized the archetype of process-driven efficiency machines. There are deadlines and metrics for art, copy and impact. As these companies become increasingly streamlined, the boundaries between the different teams are very well-defined. Consequently, each team becomes a black box that accepts input and produces output.
Certainly, there are merits to such an approach: efficiency, measurable results and well-defined timelines. Hiring resources becomes easier, it is easier to explain the company’s offerings to prospects and there is an established market for the company’s services.
On the other hand, the demerits of such an approach are very significant: Every service provider is shifting towards a similar model. Because of the uniformity of the shift across industries and geographies, adopting this approach leads to commoditization of a service provider’s offerings – inexorably leading to a price war. Such a price war often results in lower quality ideas, an intense pressure on driving up business volumes and primes the ground for a more efficient and ruthless competitor to take the crown.
So, in such an environment, how can a service provider distinguish itself from the competition?
While everybody is focussing on standardization and optimization for small improvements, the company that looks to break away from the pack and become the outlier, should focus on adopting a strategy that yields 10X returns. Innovation – systematic improvement through research and development, is the key for effective differentiation.
In the industry, professionals pay a lot of lip service to ‘Innovation’ in marketing collateral, award shows and websites, but have rarely implemented it in an effective and deliberate manner. Most companies choose to add innovation as an afterthought – usually to overburdened employees who are under pressure to meet deadlines in their existing projects.
In any service company, there are five main units: account management, planning & strategy, technology, design and analytics. All the different units directed to innovate, however, it is a secondary aim without a defined destination or budget. Consequently, innovation efforts are sidelined and relegated to serendipity in the face of deadlines. The solution would be to add the sixth team – R&D/Innovation whose sole focus would be to add value to all the activities of the other five teams and to the company. This team could produce outputs such as concepts, deliverables, products, processes and white papers while the other five teams could focus on run-rate side of the business.
Companies such as Google, 3M, Facebook and IBM have adopted this approach. They have dedicated teams of multi-talented professionals tackling problems across the board – separate, yet contributing to the other teams in the company. They have specific goals, budgets and teams to do their research and development; this research helps them stay competitive and relevant in the future. This approach has yielded world-changing inventions such as ‘Android’, ‘Orkut’, ‘Post Its’, ‘Hack’, ‘Watson’ and more.
Innovation is the way to stay competitive in the future. By starting now, companies can benefit from the early mover advantage.
This article was written on 24 Nov , 2014.