"Innovation is about creation of new economic value through breakthrough ideas

According to Anand Kripalu, President, Diageo India, in innovations, one doesn't need to be first, but one has to be right. Moreover, innovation often happens when one connects different dots & also looks at things in new ways

e4m by Twishy
Updated: Feb 25, 2014 8:39 AM
"Innovation is about creation of new economic value through breakthrough ideas

Innovation is the key to success as the market is rapidly changing and becoming increasingly competitive. There is a constant need to identify growth opportunities, increase margins and strengthen brand loyalty. Apple, Google, 3M and Amazon are some of the companies known for their outstanding innovations. Amazon differentiated itself from others through excellent service delivery. They tied up with the US Postal Service to deliver packages on Sundays. They also introduced Amazon lockers to have packages delivered at an Amazon locker located in a convenience store that was open 24 hours a day. Apple has revolutionised the entire eco-system through its innovative products, while Google has been reinventing everyday to touch people’s lives. But what does innovation stand for?

According to Anand Kripalu, President, Diageo India & CEO - Designate, United Spirits, “Innovation is about the creation of new economic value through breakthrough ideas. It is where people switch to use a new product or a new practice. In the FMCG sector, there are about 15,000 recorded innovations happening each year, however, the success rate is just 0.2 per cent. It is interesting to note that more than half the companies decide that an innovation is a success or failure in less than 12 months. It is surprising to look at their ability to persist behind an idea.”

“One lesson that I have learnt is that less is more and more is actually less. Companies who do lots of things actually do very little in terms of impact on the business and companies who do few things in a committed manner make a meaningful difference,” he noted.

According to him, in innovations, you don’t need to be first but you have to be right. Sony Walkman and Apple iPod are perfect examples as they were nowhere near to being first, but they perfected the idea and the system around them, thereby creating revolutionary products. Apple waited for the perfect time to crack the eco-system of iTunes and the advent of the broadband.

Kripalu believed that innovation often happens when you connect different dots. He cited the example of Nespresso that started 40 years ago with the simple yet revolutionary idea of creating the perfect cup of espresso coffee just like the Baristas, whenever and wherever one wants. In 1974, Nestle bought the design for the single serve coffee machine and spent 12 years perfecting the design and in choosing the right partners. It came up with the Nespresso triology, which united the highest quality coffee, best quality machine with exclusive personalized service. Since it was a premium offering and required people with the apt skills so in 1986, Nestle created a different strategic business unit with an independent charge of their own R&D, sourcing, production and marketing. The simple idea is a business worth more than $2 billion revenue today.

He illustrated the example of how Johnnie Walker married whisky with luxury, thereby connecting the dots and providing offers that people are willing to buy. According to him, this is a story of innovation through premiumisation.

“Innovation is not just about new products, it is also about new ways of looking at things. Cadbury, which occupies 70 per cent of the chocolate market, was facing the problem of growth in single digits in mid-2000s. We came to know that Indians consume a lot of sugar products and that too in the form of ‘mithai’. The whole positioning of ‘Kuch meetha ho jaye’ was about sourcing business from India’s Rs 20,000 crore unorganised sweets business to a brand that has a turnover of less than Rs 500 crore. The campaign that followed had made the brand grow at a CAGR of 30 per cent per annum for eight years in a row. This happened without a new product, without any classical innovation but just by seeing through a new lens to grow the brand. In this process, I also learnt that there are no mature brands, but only mature brand managers,” he added.

Kripalu believed that ideas can come from anywhere and very often from beyond one’s own industry. The single biggest driver of consumption at the bottom of the pyramid is the cost leadership and right pricing, not poor quality. According to him, many think that people who pay low prices are willing to accept poor quality but that’s not true. It’s appropriate quality for the price that you charge. With cost as one of the biggest drivers and spurious products as one of the biggest barriers, the spirits industry has been grappling with a huge problem. The industry wanted to come up with a solution that takes care of cost, prevents spurious products and reduces breakages in glass bottles. Hence, they took the tetra-pack idea from the milk and juice industry and applied that to the spirits industry. And it is interesting to note that the fastest growing product category for tetra -pack today in the country is spirits. He explained that taking an idea from one industry to another is also a case of innovation.

“Many great ideas died not because they were bad, but the management did not have the courage to persist. For every good idea, there is somebody who was passionately committed to make it happen. Hence, ideas cannot succeed on their own,” Kripalu said. He cited the example of how Pepsodent’s Germicheck and 12-hour protection idea failed but the management and the team kept digging at the idea to find a solution. In the third re-launch, they finally succeeded when the toothpaste gave a promise to mothers that even when the child is away from the mother, the toothpaste will take care of the child’s teeth.

According to him, it is also important for the management to create an innovation culture just like 3M, which allows employees to use 15 per cent of their paid time to do what they want. It started way back in 1948 and the exercise helps in instilling creativity. Hence, companies should encourage these programs and help in flourishing ideas.

Kripalu was speaking on the topic of winning through innovation at the ongoing 8th Indian Magazine Congress in New Delhi. The two-day Congress is being held on February 24 and 25.

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