It is claimed that Max Grundig once predicted that the Japanese would never make color televisions. As we know from history, he was obviously badly informed. His naivety is a harsh reminder to all of us that it can be fatal to misjudge situations: companies that want to be successful and stay successful must work on success 365 days a year.
The “international hunting line“ is a business term used to describe competition between countries for products and production. It demonstrates how important it is to turn innovations into reality. According to the theory, in many areas of the global economy developing countries are competing with newly industrializing countries (NICs) – especially in south east Asia and east Europe. In these countries, more and more products that were previously manufactured abroad now come from domestic production. So in turn, the nations climbing the ladder are forcing NICs to challenge the position in “strategic markets” occupied mainly, for many years, by Japan. The outcome: they are providing good standard quality products at bargain prices. As the Japanese come under pressure, they also have to “trade up”.
Examples of markets where the warm-ups can already be witnessed in the “relay race” in international competition are steel, shipbuilding or watch making. At the beginning of industrialization these industries were dominated by European and American companies. Then they were conquered by the Japanese, before being taken over by south east Asian countries. A similar, highly characteristic, shift took place in the consumer electronics market, computers and the automotive sector. As early as the 1990s “Japanese” microwaves and color TVs were not the only products emanating from factories in Thailand, Malaysia and the People’s Republic of China.
As competition has become more and more intense, the industrialized nations were basically left with two options: leverage ongoing process innovations in old markets to create enough leeway to maneuver prices upwards, or enter new markets with product innovations. Whichever direction it went one thing was almost inevitable: sooner or later NICs and developing countries would even erode this competitive advantage by copying ideas themselves or achieving cost advantage. The value of innovations was described by authors such as Michael Porter in his influential work “Competitive Strategy“:
As the drives to innovate, reduce costs or be first are increasingly mutually exclusive, companies must aim to achieve cost and quality advantage by forging ahead with product and process innovations at the same speed. In countries like Germany many companies have already missed the opportunity to gain cost or quality leadership through process or product innovations. The problem with this is obvious: if you fail to find marketing instruments that build preference – for example superior product quality or an image strategy – and are unable to rise permanently above the competition, the only unique selling proposition open to you to market the product, is price.
German companies struggling to innovate is usually a homegrown problem and often stems from a lack of imagination. In a study conducted on behalf of the Bad Harzburgbased management school “Akademie fur Fuhrungskrafte der Wirtschaft”, some of the causes pointed to by managers were:
And even when companies come up with innovations, there is no guarantee it will succeed on the market. A number of studies show that lots of new products fail to make it to the decisive growth phase and fade away. Overall the flop rate stands at somewhere between 60 and 75 per cent. The consulting company Arthur D. Little developed an evaluation filter and came to the conclusion that a mere 15 per cent of all innovation ideas should make it onto the market, although no more than two thirds of these, i.e. 10 per cent of all innovations, will remain on the market.
There are a number of reasons why so many innovations flop. Often the product fails to make any headway because of the sheer number of competitors. Others fail to establish a new technical standard or do not appeal to enough customers because the company does not provide enough options for using the product.
To make things worse, companies face a huge time dilemma. Product life cycles continue to shorten, but product development is taking up more and more time, sometimes in multiples, increasing the risk of failure. Given all of these problems, there is increasing demand for effective and insightful market research to look specifically into innovations. This applies especially to products incurring the lion’s share of innovation process costs during the development phase.
Under such circumstances creativity techniques can help tremendously. These help when thinking through and solving problems that are difficult to otherwise define or quantify, problems that can not be tackled using standard techniques. The Mannheim Inventor Workshop is a holistic technique developed by the Steinbeis Transfer Center Market Research and Marketing Know-How. It offers plenty of potential to different sized companies from all types of sectors and is fast and efficient. The workshop already has a good track record in developing a variety of solutions to an even broader variety of problems, ranging from the development of environmental scenarios to application options for new technologies in private households and even new company names.
Prof. Dr. Martin Kornmeier
Prof. Dr. Willy Schneider
Steinbeis Transfer Center Market Research and Marketing Know-How (Heidelberg)
stz826@stw.de