Low-cost innovation doesn't have to be boring or incremental. Sometimes true innovation is as easy (and inexpensive) as evaluating the technologies and capabilities you currently have and expanding them to a new industry or customer base. It is a particularly powerful product innovation strategy during an economic downturn, yet too few companies today are taking advantage of it.
Over the past two years, manufacturers have purged expenses across almost every category in order to remain afloat. Today, business leaders find themselves in the unenviable position of wondering where they can find elusive profit growth with little investment, since they cannot cut much more without destroying core businesses.
At the same time, economic depressions make returns on investments less predictable, so businesses tend to limit innovation to incremental improvements or line (product) extensions. The extensions look, feel, and perform much like the original; they are relatively risk averse, and they exhibit the feel of innovation so that outwardly the firm does not look like it is stagnating. The problem is that line extensions often provide limited economic value because they can cannibalize sales on core products and sometimes confuse consumers of the brand if these extensions are not executed correctly.
Instead, manufacturers can take a lesson from the highway signs and Web ads promoting how to "Earn $$$ using your home computer" or "Six ways to increase your income in a big way." Although we may choose to disregard these pitches and brand them as gimmicks in our personal lives, there is an important message for business leaders: "Use something you already own to generate income in a whole new way."
Truly innovative and resourceful manufacturers can embrace this message by reevaluating their existing assets, intellectual property, and product lines to develop completely new streams of revenue with little investment. The assets are already in their "corporate attics." All a company has to do is unlock the revenue-generating power of those assets.
There are plenty of success stories to show how this simple philosophy has been used in practice. Here are just a few:
- Mars has had the technology to write "M&Ms" on little candies without smudging for decades. Recently, it created a multimillion dollar business using the same machine to let people write customized messages on their M&Ms.
- Oceaneering once only applied its hydraulic technology to deepwater remote operated vehicles and other oilfield related products -- that is until the company met with some Hollywood executives who wanted to use the technology to power large dinosaurs for Jurassic Park. Revenues from the entertainment industry now make up over 15% of Oceaneering's top line.
- Play-Doh used to be a wallpaper-cleaning product with dwindling sales. All it took was the willingness to change markets and a clever revenue-sharing agreement with Captain Kangaroo to convert Play-Doh into one of America's most successful children's toys.
In each of these examples, the core technology behind the innovation already existed, and the expense associated with its development had been incurred many years prior to the new application.
Launching new products in this climate doesn't necessarily demand a large investment. It just requires that business leaders know what assets they have to exploit and have the vision to use those assets for unintended alternative commercial applications. Are there valuable technologies hiding in your attic?
Adam Elboim is a manager with management consulting firm Kalypso, which specializes in innovation.