Over the years, the typical narratives about innovation have had a distinctly Western bias: Edison and the filament bulb, Marconi and the wireless, Berners-Lee and the World Wide Web. But perhaps it’s time for a new icon—or several of them—to illuminate the fact that innovation today is very much a global phenomenon.
It is relatively easy for business leaders in Chicago or Stuttgart or Osaka to overlook the richness and range of innovation in the developing world—innovation not only in products but in business processes and behaviors as well. But Vijay Govindarajan, professor of international business at the Tuck School of Business at Dartmouth College, believes that more and more innovation will take place in emerging economies because that is where the bulk of tomorrow’s customers are. And anyone who still believes that innovation is the exclusive province of developed markets has somehow missed the rise of nanotechnologies and biotech in Beijing, digital media and genomics in Seoul, biofuels in Brazil and automotive technologies in Poland.
But there is another crucial aspect to this innovation story. It is not about where research and development funds are raised or spent, or even about the innovations themselves. It is about the innovation mindset that is pervasive throughout emerging markets—a mindset born of scarcity and expressed in levels of ingenuity and resourcefulness that are harder and harder to find in the West.
We call the fruits of this mindset workaround innovation, the entrepreneurial and usually resource-strapped approach to innovating seen everywhere from Mexico to Nigeria and from Vietnam to Ukraine. It is a way of approaching innovation that businesses all over the developed world now need to rediscover in themselves—and not only because they are pursuing market opportunities across the globe.
With the spotlight again on growth, business leaders in the developed world are placing their faith in innovation. Nearly 9 out of 10 US and UK executives surveyed in Accenture’s latest research say innovation is as important, if not more important, than cost reduction to their company’s ability to achieve future growth. And despite the anemic recovery, there is support for innovation funding: Almost half (48 percent) of the executives polled report that funding overall for innovation initiatives and activities increased in the six months prior to the survey. However, when it comes to putting innovation into practice, most are challenged to bridge the considerable gap between ideas and execution (see chart).
| Click to Enlarge |
More troubling, those British and American executives and their Western peers are not keeping pace with their counterparts in the developing world in terms of their rates of investing in research and development. Research published last year by R&D Magazine and the Battelle Memorial Institute showed that while R&D funding has been largely flat in the West, it is set to show strong gains in emerging economies, both now and projected into the future. One snapshot: China and India were forecast to drive an aggregate 7.5 percent increase in R&D in Asia in 2010, whereas R&D spending in Europe was projected to grow only 0.5 percent.
At the same time, the Accenture study found flaws in the way innovation is managed in the West, including process shortcomings and a lack of business discipline—both big internal barriers to successful innovation. In addition, among developed-world companies there is widespread aversion to risk and a failure to learn from past mistakes in innovating.
There are bright spots, to be sure. In recent years, Western businesses have begun to uncouple their over-all R&D efforts from the in-house resources available for those efforts. Companies as large as Procter & Gamble and Eli Lilly & Co. have moved assertively toward “open innovation” models. Those models transcend straightforward outsourcing of R&D activities; they use systematic Web–based “seekersolver” idea exchanges and “crowdsourcing” techniques to tap ideas from far beyond the company’s walls. They also actively involve diverse university faculty and fellows at research institutions around the globe.
But as many corporations continue to struggle to reignite growth, the need for a reenergized approach to innovation couldn’t be more urgent. This is especially important as more organizations expand globally, increasingly working with customers, employees, financiers, suppliers, infrastructure, legal frameworks and competitors whose outlooks and experiences can be a world away from what their leaders are accustomed to.
Indeed, many developed-world corporations, wedded to approaches and behaviors that have worked closer to home, appear not to have fully grasped the different approaches needed to properly address emerging markets.
Out of touch?
Ask any emerging-market business unit manager at a Western multinational, and there is a good chance she’ll tell you the global leaders in her organization have only limited understanding of, let alone direct experience with, the complex maneuvering and multitasking required of operators in Latin America, Asia or the Middle East as they seek to meet world-class business standards while operating with minimal human and financial resources.
That is especially true when it comes to serving the “bottom of the pyramid” market segments that tend to be highly fragmented, hard to categorize and out of range of conventional services, both geographically and financially. Yet such challenges are taken in stride by businesses that grew up in those markets.
Mexico’s Grupo Bimbo—the world’s largest bread-maker —provides a compelling example. Emphasizing the freshness of its products and serving a vast, complex and widely dispersed system of traditional grocery stores and changarros, or small shops, Bimbo has developed advanced systems for everything from sales and distribution to payments and inventory management. (The company’s first packages of bread were transported by public bus to Mexican grocery stores in 1947.)
Bimbo invests heavily to control its delivery chain to the point of sale. Its capabilities in Mexico and Latin America, born of endless workarounds as it turned to unorthodox solutions to common problems, allowed it to rapidly develop an efficient distribution network when it expanded to China a few years ago.
This kind of heterodoxy can be attributed in considerable measure to the entrepreneurship that is flourishing in many emerging economies. Entrepreneurs are risk takers, and risk taking is often the enabler of innovation. By contrast, there is at least anecdotal evidence to suggest that in recent years, multinationals from the developed world are more reliant, not less, on practices and protocols promulgated at “headquarters.”
The facts of life
In essence, a workaround is a temporary fix that requires minimal resources. It is an approach to innovation that relies heavily on judgment and experience at the point of the problem, and that puts a premium on speed.
Workarounds are facts of life for many in emerging markets; they are necessary and usually rapid responses to everything from blackouts and phone outages to onerous bureaucracy and the daily grind of poverty. The scarcity and unpredictability now seen as the “new normal” in the West are quite normal and hardly new—in emerging economies.
As such, a workaround mentality is commonplace throughout the emerging world. In India, in fact, it is summed up in the Hindi word jugaad, which Harvard Business Review translates loosely as “overcoming harsh constraints by improvising an effective solution using limited resources.” Indeed, the street-level inventiveness and resourcefulness on display from Cairo to Kolkata is legendary among world travelers and expatriate workers from industrialized nations.
However, it is essential to distinguish between precarious improvisation—think of homemade motor vehicles and jury-rigged household wiring—and the kind of genuine innovation, often characterized by out-of-the-box thinking, that can lead to lasting solutions. Properly harnessed, workaround innovation, like other forms of innovation, can generate a step-change in the performance of a system, product or process, or a material change in cost structure. It will usually lack conventional funding, however, and won’t fit within formal R&D activities.
Of course, workaround innovation is by no means exclusive to emerging economies. But to a large extent, the Western world’s resource richness—ready access to technology, financial services and telecommunications infrastructure, for instance—has robbed it of its reliance on the native imagination, drive and perseverance that helped produce the unprecedented surge of prosperity seen in the global economy in the second half of the 20th century.
Shining a brighter light on the capabilities innate to many in developing nations can also help undo the bias implicit in the term “reverse innovation”—an expression that effectively stigmatizes innovations that come from, say, India or China and that hints, uncomfortably and often unfairly, at patent or copyright infringement.
Before business leaders in developed markets can start to consider how they might foster workaround innovation in their own organizations, they need to get inside the heads of today’s practitioners. Here are the core attributes of emerging-market innovators.
1. They encourage and support resilience
It is important to ensure enough flexibility in policies and practices so that when staff members hit setbacks, they have the latitude and space to find innovative responses. It is also helpful to foster a culture that recognizes and celebrates resilience, so when employees proactively bounce back from setbacks, their recoveries are acknowledged.
In the United States and Western Europe in particular, the average middle manager is not old enough to have experienced multiple economic slumps or infrastructure disruptions, so he has developed few proven responses to hardship. But his counterpart in Argentina or Russia has been through plenty of crises large and small, and knows there are more ahead. Having lived to tell the tale—and perhaps even thrived—the Argentine manager has the confidence of knowing he can almost certainly surmount the next crisis.
2. They have a strong stomach for managed risk
On the whole, managers in emerging nations are much more likely to act without waiting for all the relevant data to confirm their decisions. This is not necessarily by choice: In most cases, emerging-market managers have little or no detailed historical data or statistical models on markets and competitors, and what they do have may be inaccurate or incomplete. What’s more, long lead times for testing, modeling and validation are incompatible with unpredictable financial and political climates.
They are more likely than their Western counterparts to leverage past experiences to assume a “go for it” approach. So the Brazilian manager sees more risk in not trying, and believes there is much more to be learned from rapid real-world experiments.
3. They operate with a sense of ownership
Facing a turbulent economy, Western managers often simply try to ride out the storm—slashing costs and waiting for the situation to return to normal. But the storm-toughened manager in Russia or Brazil plans and acts as if the downturn or disruption is permanent—as if it is the “new normal.” She knows from experience that she will still have to meet volume, market share and profit targets.
She also realizes that no relevant outside help will arrive—at least, not in time to make a difference. So she takes charge of the situation, marshaling the necessary resources and committing herself and her team to resolving the issue and meeting her targets.
So what can business leaders do to acquire and benefit from a workaround mindset? We suggest the following guidelines.
Think “spoke to hub,” not just “hub to spoke”
Most multinational companies have sizable footprints in the emerging world, so they have immediate access to employees who are used to dealing with scarcity and uncertainty. As a result, those organizations are well placed to implement “spoke-to-hub” and even “spoke-to-spoke” frameworks where the brightest stars from emerging markets are able to coach managers in developed countries.
These models are not to be confused with programs designed to foster diversity or inclusion; the objective of disseminating a workaround mindset is to improve the organization’s all-round innovation capabilities. The emphasis is on the exchange of ideas on everything from formal advisory boards to training programs that involve case studies of best practices from throughout the worldwide organization. The objective is to enable Western managers to understand what their counterparts in developing nations must deal with, and to help them appreciate successes other than their own best-practices bubbles, which are often underwritten by an abundance of resources.
Another tactic is to shape participation in leadership development programs and corporate strategy development programs with an overrepresentation of leaders and up-and-comers from the organization’s operations in the developing world. Such programs send a clear signal that it is essential to pay more attention to the voices from the new markets.
Nor does a focus on the spokes diminish in any way the importance of best practices. Leading companies will understand how to find the balance between encouraging an entrepreneurial workaround mindset and a maverick stance that threatens to create further silos and lead to its own disruptions.
Identify the workaround innovators you already have
In practice, workaround innovation is happening all the time in almost all organizations, even if it is not recognized as such. In large multinationals, there will likely be a slew of small, daily examples in most functions, business units and regions. It will not take much effort by senior executives to shortlist the managers who are masters at delivering strong and growing profits on minimal budgets and with tiny staffs.
The next step is to deconstruct the workaround innovator’s approaches and see what can be replicated. And then it is important to begin to create a workaround culture without diminishing the value of more traditional innovation channels. That effort starts by sharing and publicly celebrating the achievements of existing workaround managers.
Shoot for the moon
Workaround innovation can begin with what authors Jim Collins and Jerry Porras have labeled “Big Hairy Audacious Goals”—visionary goals that are strategically and emotionally compelling. Ideally, these goals should be voiced publicly and enthusiastically by senior leadership.
That was the case at India’s Tata Motors in 2003 when Ratan Tata, chairman of parent Tata Group, challenged the company to develop a car that would compete with the country’s ubiquitous motor scooters—and sell for only $2,000. The result of this “put-a-man-on-the-moon” undertaking is the Nano, a low-weight, low-carbon vehicle with many innovations in production methods as well as features.
Look for and utilize “leapfrog” tools and techniques
Workaround innovation calls for less hesitation about using cutting-edge technology if that is what provides compelling business advantage more quickly.
Banco Azteca is a case in point. The financial services provider caters to the 50 percent-plus of Mexico’s population who earn too little to be targets of traditional banks. Azteca opted for fingerprint-scan biometrics solutions to authenticate the identities of customers, many of whom lack driver’s licenses or other secure forms of identification. At launch, the scanning system, rolled out to more than 8 million customers, was the largest biometrics program in the banking sector. Today, Banco Azteca is also successfully rolling out a microfinance business model across Latin America.
Share ideas at speed
Workaround innovations that solve a specific problem at a point in time are valuable—but not as valuable as the same innovations shared quickly and widely around the organization so that others can benefit from them as a new best practice. Ideally, the idea will spread without the creation of bureaucracy in its wake; the idea network should be largely self-managing.
That was the case at a large consumer goods retailer, which had technicians who were so passionate about the company’s products that they devised workarounds for installing particular systems in customers’ equipment. The idea was promulgated via social media—specifically, wikis—so that others had a chance to contribute to the evolving solutions.
To some extent, executives in developed countries have forgotten how to innovate outside of their codified best-practice models. Weaned on the virtues of standardized approaches and tight process controls, they undervalue “folk medicine” like workaround innovation that can be found along rougher but readier growth paths.
Given the proliferating uncertainties in business today, these leaders owe it to themselves and their shareholders to explore and establish such new paths to growth. Resources must not be viewed as entitlements, much less prerequisites for action; best practices should not be seen as the only route forward.
And listening to the locals is mandatory. Managers in emerging economies know that instinctively. Managers in the developed world must get to know it soon.
For further reading
“Brazil on the move,” Outlook, October 2010
“Open innovation: How to create the right new products, the right way,” Outlook, October 2009
About the Authors
Karen Crennan is the managing director of Geographic Strategy for Accenture. She is responsible for identifying opportunities within Accenture’s geographic portfolio to accelerate growth, enhance competitive position and improve profitability. Ms. Crennan, who is based in Milan, also serves as chairman of the board of Accenture Global Services.
Carola Cruz is the marketing lead for Accenture in Mexico. For more than 20 years, she has worked in numerous leadership positions in packaged goods, media, advertising and public affairs in the United States, Canada and Mexico. In addition to her marketing responsibilities, Ms. Cruz is responsible for developing content on emerging market innovation, traditional commerce and emerging consumers. She is based in Mexico City.
The authors would like to thank the following contributors to this article: Luiz Ferezin, country managing director, Mexico; Roberto Alvarez Roldan, country managing director, Argentina; Harsh Manglik, country managing director, India; and Pedro Jose Garcia, director of financial services, Latin America.