Business model innovation and eco-system innovation

The biggest block to ‘orbit shifts’ of any form is ‘mindset gravity.’ In case after case one can see that the biggest enabler to orbit shifts is not innovation processes, not idea gathering sessions, not innovation tools, and not even ideas. Instead it is the breaking free of mindset pull that releases individuals and organizations to leap frog existing growth paradigms.

Take the case of Marico. Marico was confronted with a major challenge when Hindustan Unilever decided to take on its leading brand, Parachute, with Nihar (in late 90s). Unilever backed Nihar with big ad spends and the initial impact was substantial. Marico hired an expert consultancy to seek their guidance in applying innovation to respond to this challenge.

On digging deeper, the mindset gravity emerged. The organization had settled into a ‘defender’ mindset, and as a result most of the thinking and ideas had been unconsciously guided by the thought of minimizing encroachment.

Once Marico’s leadership confronted this mindset gravity, it took a conscious decision to shift and think like ‘attackers’ and not defenders. They worked with the powerful conviction that ‘if we can’t beat their resources, we can beat their ideas’. This mindset shift resulted in waves of innovation that led to Parachute acquiring the highest market share in its history. Marico went on to acquire Nihar a few years later.

The real enemy of innovation is the layers of invisible constructs and beliefs that unknowingly limit the thought spectrum, reduce the exploration space and stifle new possibilities.

There are four levels of mindset gravity, the first of which is organizational gravity, which is the tendency to convert previous experiences into success templates that then become gravity. A multinational in India was very successful in the UPS business and decided to expand into inverters.

The success formula of the UPS was replicated for inverters, with the same channels and customers. When Sukam came in and completely shifted the channel and customer paradigms, the multinational realized that it had been trapped by the legacy of its successful UPS business. But by then it was too late.

On a deeper level, there is industry gravity. An entire industry begins to think alike and believe that after years of competitive benchmarking, growth now can only be incremental. When Dainik Bhaskar entered the newspaper markets of Jaipur, Chandigarh, and Ahmedabad, the newspaper industry across the world believed that it takes nearly half a decade to reach any sort of leadership position.

But Dainik came through with a breakthrough strategy that made them leaders in city after city. Even more invisible and deeper is country gravity. After a while all industries in a country begin to accept what a country can do and cannot do. i-Flex, for example, believed that Indian IT companies could go beyond back end work and create and sell a product and went onto create Reveleus – a successful banking product.

Most organizations that try to build ‘innovation process’ without tackling the mindset gravity end up institutionalizing what’s called a Stage Gate process. The hard reality is that such processes yield only incremental innovation. Stage Gate creates a ‘fit-in’ lens, whereas innovation needs revised thinking lens.

For instance, when Titan first set out to create the slimmest water resistant watch in the world, the idea sat on the corporate shelf for two years because marketing refused to take it up. According to them, the world had moved to chunky watches and a slim watch was out. The watch didn’t ‘fit’ existing trends. Today it’s a huge success.

The chances of creating an orbit shift are greatest when innovation is a precursor to strategy. It is this that opens up spaces beyond the usual product and service innovations. It opens up the larger space of business model innovation and an even larger space of eco-system innovation. ATM banking is a business model innovation while micro-credit is an eco-system innovation. Ecosystem and business model innovations rarely happen because the mindset is that innovation follows strategy.