Vesanique Vision: Innovation, Not Hesitation
Editors Note: Vesanique is committed to providing our clients with valuable nuggets of wisdom under the “Insights” banner. Today, we’re proud to debut a new series of features titled “Vesanique Vision”. Here, we’ll be deep diving into the importance of innovation in spans of economic duress. We hope that the information and opinions assembled prove deeply valuable in your pursuit of business glory.
The Economic Abnormal
People will try to tell you that all the great opportunities have been snapped up. In reality, the world changes every second, blowing new opportunities in all directions, including yours.
Ken Hakuta
Australia’s economic situation appears onerous. Consumer price inflation is at a historical high of 6.1%. Domestic fuel prices have surged by 67%, with the enduring Russian-Ukraine War disrupting the global supply chain for petroleum. In response, the Reserve Bank of Australia (RBA) has pursued a series of interest-rate hikes to depress demand and lower inflation to its target rate of 2.35%.
Australian news agencies have likened the economic circumstances above to a looming crisis threatening to halt our post-COVID-19 economic rebound. Such an unflattering portrayal of our economic health should not elicit surprise, with 44% of Australian businesses reporting an increase in the cost to do business, and 62% of medium businesses reporting acute labour shortages. Talent mismatching, stagnating productivity and inflated costs are a recipe for economic upheaval.
Consult any Australian business, and they’d agree with the fourth estate’s prognosis. The foreclosure of over 305,085 Australian businesses reflects an underlying pessimism and a heightened aversion to risk. As economic dread befalls us, expect to witness more small-to-medium businesses enter a period of financial austerity.
But for every unprecedented doomsday scenario, there lies an opportunity for creative innovation. Author of Smarter, Better and Faster, Charles Duhigg, notes the importance of implementing “disturbances” into the design-thinking and ideating process.
Investing in your own business when circumspect competitors are unenthused to do so would position you as an innovative leader in this turbulent period.
A Strong Case for Innovation: A Tale of Two Companies
Joseph Schumpeter, a Nobel-Prize-winning economist, describes “creative reinvention” as changing internal processes through innovation. The firestarter for such sweeping reforms arises from a continually evolving marketplace.
Classically, technology and innovation, capital and labour form the anatomy of all healthy economies. However, technology and innovation have not shown signs of diminishing returns in the preceding decades.
The economic turmoil Australia is undergoing parallels Schumpeter’s observations. While incumbent Prime Minister, Anthony Albanese, addressed Australia’s persistent labour shortages, improvements would take years to bear fruit. Instead, small-to-medium businesses should prioritise research and development, the rapid integration of innovative technologies and efficient internal restructuring.
With consumer sentiment contracting by 20 points between October 2021 and July 2022, businesses must proactively convince consumers that their products/services provide outstanding value. Measures enhancing your product or services’ real and perceived value are considered innovations. Therein lies the opportunity to reinvent yourself as a frontier-pushing leader in a struggling sector.
All innovations strive to acknowledge and address your target audience’s diverse concerns. With cash-strapped households unwilling to make frivolous purchases, the consumer’s mindset is the starting point for unfettered innovation.
In contrast, misunderstanding what the consumer is searching for and offering inadequate solutions to address the wrongly-identified issue is the death knell for brands hurtling towards an imminent shutdown.
Case Study A: Nokia Failed To Innovate
We didn’t do anything wrong. But somehow, we lost.
Stephen Elop, Nokia CEO
Nokia is a Finnish telecommunications and consumer electronics company that first opened in 1865. Once vaunted for its nascent phone innovations like the cult-classic Nokia 3210, Nokia had a far-reaching influence that spanned the global marketplace.
Unfortunately, Nokia has become a mere footnote in a flourishing marketplace dominated by Android and Apple, the 2007 release of the cult-classic iPhone foreshadowing its acquisition by Microsoft.
There is an assortment of explanations for the conglomerate’s collapse. According to a qualitative study conducted by INSEAD Singapore, Nokia’s top-level management was enmeshed in a self-destructive cycle of denial, persuading themselves that the brand’s historical reputation would be enough to weather the competitive ingress of Android and Apple. Nokia unyieldingly stuck to the baseless belief that consumers valued their QWERTY-style keyboards over the capacitive touchscreens adorning the latest iPhones.
In contrast, reality painted an unflattering picture. Nokia’s Symbian operating system was technologically inferior to Apple’s IOS. They had failed to accurately acknowledge that customers were after novel market innovations that their products/services did not bear. The combined challenge presented by Android and Apple dethroned Nokia as the telecommunications zeitgeist.
Nokia is a textbook example of an ageing institution stubbornly wedded to out-of-date traditions, failing to accommodate shifting customer needs and losing out to competent rivals who can no longer be denied entry from their industry’s orbit.
Case Study B: Woolworths Succeeded in Innovating
“In all things to do with digital and e-commerce, the consumer is [the one] leading us. Keeping up with them is invigorating,”
Brad Banducci, Woolworths CEO
Instead of spotlighting the noteworthy failures of others, this case study shines a light on the successes of creative reinvention.
Founded in 1924, Woolworths is Australia’s biggest grocery store chain. The devastating COVID-19 pandemic in 2020 caused international border shutdowns and domestic lockdowns. Consequently, Woolworths faced short-run supply chain issues from an unceasing surge in demand for staple items.
Keeping staple goods and essential items stocked on the shelves was a persistent challenge that showed no signs of abating. Moreover, COVID-19’s virality proved fatal for staff and consumers congregating in grocery stores for extended periods.
Acknowledging the customer’s desire to avoid close contact with others, Woolworth’s refined services such as click-and-collect lowered their risk exposure. Exclusive shopping hours were reserved for the elderly to ensure the equitable selling of groceries. Furthermore, Woolworths modernised its delivery systems to ensure customers’ online orders were delivered in a time-efficient manner. Their online application saw novel user-friendly redesigns that augmented the online shopping experience.
Woolworths CEO, Adam Banducci’s stalwart focus on technological innovations and calculated value-adds to the customer experience strengthened Woolworth’s gleaming reputation.
Woolworths correctly identified their customer’s health concerns, providing safe access to their commodities and services. Mr Banducci’s familiarity with their stock’s possession utility (the ease of acquisition) placed them in an advantageous position.
Seize the Innovation Opportunity
Necessity is the mother of invention
Unknown
A 2020 study organised by a global management firm, McKinsey & Company, reveals that innovators outperformed their immediate competition by 10% amidst the crisis, followed by 30% post-crises. The report’s preface aptly opines: “prioritising innovation today is the key to unlocking post-crises growth”.
Timorously anticipating Australia’s exit from this present predicament unscathed would be futile. The restoration of the Australian economy begins when businesses facilitate this period of evergreen recovery through explosive growth and innovation.
As illustrated by Nokia and Woolworths, Australian businesses of all stripes must dauntlessly embrace economic change and decouple from business conventions. Peering beyond the hedge that is your every day operations would reveal your company’s burgeoning potential. Tapping into this font of unrealised potential allows innovation to spring forth like a geyser.
But unbridled innovation comes at a cost. Thankfully, your investment coffers need not be the size of an energy magnate or a Forbes 500 mogul. How your scarce resources are allocated determines their productivity in the marketplace, not the dollar value of your initial investment.
Seeing past the titillating headlines of the news media, the Queensland government unveiled numerous grants for modernising domestic businesses during the COVID-19 pandemic. The “Small Business Technology And Investment Boost” (SBTAIB) and the “Business Basics Grant” are financial lifelines for minimising the entire outlay of upgrading business operations. Leveraging government aid should be part and parcel of lowering your assumed risk.
Surviving economic dislocation is not contingent on maximum cost minimisation but on innovative expansion and cautious investing.
Invest In Innovations Across Your Value Chain
The value you promise to supply your clients exists within your company’s overarching value chain. As illustrated earlier, perceived and real value shares comparable importance in your brand’s value proposition.
Therefore, presenting your clients with compelling value should be the focal point of all investment efforts. Value centres that do not directly assuage your customer’s prescient worries or concerns lag behind their dynamic expectations. Internally assess your end-to-end value chain, identifying the tributaries that require targeted improvements.
Yet, how you choose to put your financial investments to productive use depends on which “type of value” you’re honing in. Allow us to clinically examine both value streams under a microscope.
Example A: Perceived Value Innovation
Investopedia describes perceived value as your customer’s desirability for a product/service, the operative word being “perception”. How customers psychologically ascertain the product/service’s inherent value is remarkably different from its actual utility. Prestige, reliability and visual appeal are embellishments that further add to its base value. Ted Sutherland’s TED Talk in 2008 defines perceived value as the practice of making old concepts appear new.
Your brand’s marketing approach determines how well your company tacitly communicates the attractiveness of its products and services. Naturally, all brands spruik their product’s/service’s superiority over their competitors.
As discussed above, consumers are parsimoniously opting for financial prudence over callous spending habits. With inflation rates projected to decline in 2023, expect the cost of living to remain unnaturally high for 2022. Savvy customers are scouring for products/services that deliver value beyond their price tags. Captivating marketing is the soapbox that persuades them in that regard.
If your current brand or marketing strategy falls short of swaying your customer segment to your side, an urgent re-evaluation of them is necessary. The expert services of a Brisbane brand agency like ours can help you determine faulty elements across your branding/marketing misaligned with mercurial customer expectations.
These points of weakness are extraordinary opportunities for reinvention and innovation. Every branding and marketing effort should be in-tune with customer trends and preferences. Our multi-disciplinary team revises existing brand and marketing strategies, implementing agreed-upon changes that better convey the intangible value of your products/services.
Thus, perceived value is an influential component in your value chain and your cost-benefit analysis should not neglect it.
Example B: Real Value Innovation
Real value focuses more on the concrete, your products/services’ real use value. Variables that contribute to their final retail prices fall under this category.
Investing in cost-cutting manufacturing, time-efficient management techniques and waste reduction practices lowers business expenditure in the long run, amortising it over time.
These margins provide your business with fresh streams of income for reinvesting. More distinctly, these savings spill over into the asking prices of your products/services Delivering an identical product/service at a lowered price boosts its real-use value, enhancing its attractiveness in the eyes of prospective customers.
Generally, prospects unmistakably understand this price cuts almost immediately. Australian customers would appreciate any cost savings in these challenging times. However, unannounced price cuts might inadvertently signal a decline in product quality.
Businesses should consider how both value streams interface with each other before endeavouring to alter them for innovation’s sake.
Foresight, Not Hindsight
As shown by the infamous Marshmallow Experiment, there is a strong positive relationship between delayed gratification and long-term success.
Unfortunately, the field of behavioural economics has taught us that humans have a natural propensity for being impatient, preferring benefits now and delaying costs indefinitely. Chronic impatience plagues our decision-making during stretches of financial ambiguity. Hesitation and risk aversion paralyse bearish businesses from investing in innovative pursuits.
Economies that gradually emerge from financial calamities are altered forever, the marketplace shifting to placate ever-changing consumer needs. Therefore, innovation inaction is a surefire way to shorten your enterprise’s lifespan.
But historical hindsight shows that it pays to invest in innovation upfront and reap the protracted benefits later during moments of recessionary shock. The 60% gain in eCommerce sales in 2020 reflects an Australian marketplace that adapted to the persistent lockdowns triggered by COVID-19. Prosperous businesses have the foresight to invest in innovation, their resolve unshaken by the unfolding downturn. Take it from a Brisbane digital agency like ours: innovating in your brand’s value chain through a brand strategy refresh or rebranding is one such way to weather the economic tempest.
Australia’s economic climate in 2022 is as turbulent as it was in 2020 and 2021. Like preceding crises before, innovation will always be the solution.