In praise of creative theft ... from other industries
27 June 2018
Published by IIE
Article originally published on Business Think, UNSW Business School
Mid-market firms could gain from transplanting external ideas.
When you look hard enough, you discover the business world boasts brilliant stories of cross-industry innovation. They are tales of companies that have solved an issue or created an entirely new product or service by borrowing an idea from an industry that is, at first glance, completely unrelated.
There's the food production company that solved a shelf-life problem for its whipped-cream-in-a-can product by seeking input from fire extinguisher manufacturers.
Or the craft beer brewing business that created a new taste sensation – ale with a hint of honey – when its owner found himself in the same tattoo studio as a beekeeper.
And then there's the air-conditioning company that solved a performance issue with its cold-temperature pipes when it adopted a solution created long ago for use in refrigerated food trucks.
But you do have to look hard to find such stories.
Now a group of researchers from UNSW Business School, in the first year of a project funded by the Australian Research Council and linkage partner GE Capital Australasia, has begun to reveal some of the secrets of innovation within mid-market companies (A$10 million to A$250 million annual turnover).
The overarching task of the team, led by associate professor Steven Lui, is to connect the way a company's CEO thinks – the CEO's cognitive abilities – to the way their firm behaves in terms of innovation.
First to solve the problem
Understanding more about innovation in the mid-market sector is important because it includes 27,500 businesses and contributes A$425 billion annually to the Australian economy.
"[But] mid-market organisations have resource constraint," says Ben Walker, a research fellow on the project.
"They don't have the staff numbers, budget or other resources of a large organisation and most of them think of innovation mainly in terms of what they can achieve in-house.
"We are interested in how many of them seek answers externally, not from their own industry but from further afield. Our current interviews seem to indicate that only a small percentage of businesses do this."
Taking ideas from elsewhere, of course, can be seen in a negative light. It can be thought of by staff as idea theft, or copying. But adopting such ideas into your own industry requires considerable innovation.
"Philosophically, the way many academics see the issue of innovation is with the understanding that there is nothing new. Any form of innovation is always some combination of existing things," says team member Salih Zeki Ozdemir, a senior lecturer in strategic management.
'Any form of innovation is always some combination of existing things' – Salih Zeki Ozdemir
Ozdemir notes that even though you might be looking outside of your industry for solutions, at the end of the day there will still be something new coming in.
"So the point around which you will be able to motivate your employees is that you are the first to be able to solve the problem and adapt it to your industry, in its own context," he says.
Rebelling against trends
Managers in mid-market firms are concerned about motivation, and transplanting solutions may be less motivating, so framing it as the first solution in their industry may assist with motivation.
The research team, which also includes professor Chris Jackson and associate professor George Shinkle, explains the argument this way:
"One should ask, is transplanting an idea from one industry and applying it elsewhere really imitation or is it innovation? Is it the first use in this new area, is it novel and likely to accrue higher margins? We suggest that transplanting innovations from other industries or activities is potentially a very valuable strategy and should not be simply classified as dishonourable imitation."
Moreover, while imitating your industry competitors has the negative consequences of making each other similar in the eyes of customers and hence potentially resulting in erosion of prices, transplanting ideas from other industries and the innovation that emerges from it doesn't suffer a similar fate.
And sometimes such innovation, which isn't always connected with a physical product or part, is actually about rebelling against your industry's current trends and standards.
Walker tells the story of online wine retailer Vinomofo. Founders Andre Eikmeier and Justin Dry were passionate about wine but not about the wine industry's snooty, bowtie-wearing image.
They began as a wine review website, Qwoff, and four years later started selling the wines they recommended. But because they didn't want to sell wine in the typically rarefied atmosphere of the wine industry, they hired a web designer from the music industry.
Vinomofo won the 'Best website' gong at the Smart Company Web Awards in 2013 and 'Best startup' at the 2014 Australian Startup Awards. The business is one of Deloitte's Tech Fast 50 fastest growing companies.
"This was a marketing innovation approach, but there is a broad range of ways to introduce such innovation into a business," Walker says.
"One company said they intentionally hire from outside their industry because they don't want to bring on board the bad practices of their competitors. That way they are more likely to bring in new ideas."
Opportunities in disguise
Solutions from other industries can involve parts, people, products, technology, marketing and much more. But solutions only present themselves after a problem is identified.
'One company said they intentionally hire from outside their industry because they don't want to bring on board the bad practices of their competitors' – Ben Walker
"You need to understand the root of the problem that you are facing," Ozdemir says. "The most important part of the innovation process is first to develop a clear understanding of what exactly the problem is."
Those problems, and especially the difficult-to-solve ones, Walker says, are opportunities in disguise. One CEO he interviewed, Joe Andon from trampoline company Vuly, keeps a 'frustration book', for instance.
"Whenever he is frustrated by anything he writes it down in his book, because there's an opportunity," Walker says. "If there was no frustration then customers are being adequately served and there is no opportunity."
Transplanting innovation is one of a range of innovative solutions for companies.
"If you have a problem," Ozdemir says, "then by all means attempt to solve it on your own. There is nothing wrong with that. Most managers will also have an eye on the competition to see what they are doing – this is also a healthy business habit.
"Then, one of your processes might be to take a step back and think about who else in any industry might have had a similar problem. Not the exact problem, but a similar problem."
Fortunately, a large amount of such information is now available on the internet and can be readily accessed; however, it does require investigative searching.
Evaluate the benefits
Companies shouldn't obsess over finding ideas in other industries. This is simply one tool in the innovation toolkit.
"You don't want to start adopting things just because they worked in another industry without really thinking through what they would mean for your industry," Ozdemir says.
"Just because you have a hammer, it doesn't mean everything is a nail. You have to carefully evaluate the benefits of each solution."
The critical part, he says, may be how the innovation is implemented in the company. At the end, however, trying to reinvent the wheel every time by yourself is almost always a waste of resources.
Link to video: https://www.vlga.org.au/resources/videos-webinars/leading-agenda-in-august Presented in partnership with Leading the Agenda sponsors Pitcher…
Article originally featured on Pitcher Partners 18 February 2019, written by Denise Honey, Partner, Pitcher Partners. Pitcher Partners makes a submission on…
Download originally featured on UNSW Business School 'A Survey on the Innovation of Australian Companies 2017' has been prepared by the University of New…